Despite a slight decline in mortgage rates, homebuyers are still facing multiple challenges that are constraining their purchasing power. According to Freddie Mac, the 30-year fixed rate mortgage rate fell to 6.39% from 6.43% the week before. However, the decline was not enough to offset the challenges that homebuyers are currently facing. These include a shortage of for-sale homes, which is driving up prices, making it difficult for potential buyers to enter the market.
The Inventory Woes
Additionally, homeowners remain hesitant to sell, worsening the market’s inventory woes. The lack of inventory is a primary obstacle to affordability, despite homebuyers acclimating to the current rate environment. The volume of mortgage purchase applications fell 2% last week, according to the Mortgage Bankers Association (MBA), the first decline in three weeks. Overall, demand was 32% lower than the same week one year ago.
One of the main reasons for the recent drop in demand is the revived tumult among regional banks, particularly its impact on jumbo loans as some lenders tighten standards. The jumbo-conforming spread continues to narrow, indicating that there is reduced lender appetite for jumbo loans following the recent turmoil in the banking sector and heightened concerns about liquidity.
Mortgage Rates Cool Down but Homebuyers Lose Out As Sellers Decide Not To Sell
Challenges for Homebuyers Continue
Home prices are also causing strain for homebuyers. For instance, home prices increased more than previously estimated in the first three months of the year, according to a study from Black Knight. As of March, home prices had risen 0.45% from February. Prices are now just 1.7% off their June 2022 peak.
Many potential move-up sellers are deciding to stay put this spring, causing a growing problem in the housing market. New listings of homes for sale slid 22.4% in the U.S. from the previous year during the four weeks ending April 23, according to Redfin. This is one of the largest declines reported since the start of the pandemic. In April, the number of newly listed homes for sale fell 21.3% nationwide and in 49 of the 50 largest markets compared with a year ago, according to a separate study from Realtor.com. Pending listings, or homes under contract, also fell 22.5% year over year in April.
Despite these challenges, Freddie Mac’s chief economist, Sam Khater, said, “Spring is typically the busiest season for the residential housing market, and, despite rates hovering in the mid-6% range, this year is no different. Interested homebuyers are acclimating to the current rate environment.” However, the lack of inventory remains a primary obstacle to affordability. Mortgage rates may have inched down slightly, but with home prices on the rise and inventory still low, the challenges for homebuyers continue.
