Mortgage Rates Drop For Fifth Consecutive Week

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Inflation cooled in March as the Federal Reserve’s interest rate increases showed more impact. The U.S. Bureau of Labor Statistics released the March Consumer Price Index (CPI)  This Week in Real Estate, and the data revealed that while inflation is still well above where the Fed feels comfortable, it is at least showing continuing signs of decelerating. Over the past year, the Fed has raised its benchmark interest rate nine times for a total of 4.75 percentage points, the fastest pace of tightening since the early 1980s. The March annual increase for the CPI was the smallest since June 2021. Mortgage rates dropped for the fifth consecutive week, reaching the lowest level in two months, resulting in a 7.8% week-over-week increase in the mortgage purchase index – which measures mortgage applications for the purchase of a home. “Each half a percentage point drop in mortgage rates results in an additional 200,000 home sales, and likely even more,” according to Lawrence Yun, chief economist of the National Association of Realtors. Below are a few newsworthy events from the second week of April that influence our business: 

Falling Mortgage Rates Set to Boost Home Sales by More Than 200,000. The decline in mortgage rates over the last month likely will boost U.S. home sales by more than 200,000 as cheaper financing results in more people qualifying for loans, according to Lawrence Yun, chief economist of the National Association of Realtors. “Each half a percentage point drop in mortgage rates results in an additional 200,000 home sales, and likely even more,” said Yun. “Since more people will qualify for mortgages, it leads to more sales.” Mortgage rates likely will remain near the current level in the short term and decline further in the coming months, Yun said. The average U.S. rate for a 30-year fixed mortgage probably will be 6.3% in the second quarter and 5.9% in the third quarter, he said. About 40% of U.S. home sales go under contract in the April to June period, according to data from NAR. Those sales typically close about two months later, with the buyers moving in the summer months. Read the full story here.

30-Year Mortgage Rates Fall to Their Lowest Level in Two Months. Mortgage rates dropped to the lowest level in two months. Demand for mortgages rose 5.3% in the latest week as rates dropped for the fifth consecutive week. Demand rose for both purchases and refinancing. The purchase index – which measures mortgage applications for the purchase of a home – rose by 7.8% from the previous week. There’s a lot of pent-up demand in the housing market, but prospective buyers are watching the gyrations in mortgage rates and face challenges with low housing inventory. Rates are falling across the board due to weaker economic data, giving would-be home buyers some breathing room to apply for mortgages. “Prospective homebuyers this year have been quite sensitive to any drop-in mortgage rates, and that played out last week, with purchase applications increasing by 8%,” Mike Fratantoni, senior vice president and chief economist at the MBA, said. Read the full story here.

U.S. Inflation Slows to 5 Percent in March, Lowest in 2 Years. According to the U.S. Labor Department, the Federal Reserve’s consistent interest rate hikes are now showing an impact in March 2023. The data showed that while inflation is still well above where the Fed feels comfortable, it is at least showing continuing signs of decelerating. Policymakers target inflation around 2% as a healthy and sustainable growth level. The headline annual increase for the CPI was the smallest since June 2021. The National Association of Realtors Chief Economist Lawrence Yun commented, “Calmer inflation means lower mortgage rates, eventually. The 5% consumer price inflation in March is a steady improvement from 9% last summer, 8% in autumn, 7% during Christmas, and 6% in the early months of this year. The ideal inflation of 2% is still maybe a year away, but this directional improvement is a clear signal to the Fed to change it’s tightening monetary policy. Read the full story here.

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