Mortgage rates fell this week. It appears that rates have already accounted for some of the effects of the Fed’s tightening policy. According to Freddie Mac, the 30-year fixed mortgage rate dropped to 5.7% from 5.81% the previous week. Although rates are significantly higher than last year, they are still historically low, remaining below 6%.
As the second quarter draws to a close, the housing market has cooled. Nearly 12,000 fewer homes were sold during April and May compared to the pre-pandemic average. It’s a fact that many households are impacted by higher mortgage rates as they no longer earn the qualifying income for the median-priced home. In the second quarter, home buying became 15% more expensive, increasing the qualifying income from $90,000 to $104,000. As seasonality trends will conclude after the summer months, it’s likely an even larger reduction in home buying activity will occur. Meanwhile, inventory is improving. According to NAR, inventory rose 25% during April and May compared to 8% — the pre-pandemic average for the same timeframe. With more homes available in the market, price gains will ease by rising at a slower pace.