Mortgage rates decreased for the fourth week in a row, providing homebuyers with a little more relief. However, larger declines might be required to make up for other difficulties buyers are facing this spring.
The 30-year fixed mortgage’s average rate dropped from 6.32% the previous week to 6.28% this week. The decline in the 10-year Treasury yield since early March, which was initially spurred by the banking crisis and then sustained by indications that inflation may be slowing, is reflected in the nearly half-point drop in rates over the past month.
While the decrease eases some of the pressure on buyers, the ongoing scarcity of homes for sale makes it difficult for them to find a place to call home. Rates haven’t decreased significantly enough either to persuade many homeowners to list their properties, maintaining the housing shortage that keeps prices high.
Affordability and availability of homes are the biggest obstacles for buyers in today’s market, though both are driven by mortgage rates. “Many homeowners simply are not willing to leave their current homes and manageable monthly payments in order to enter a competitive, pricey market.”
Despite the lower rates, buyers are either unable to buy or choose not to.
According to information from the Mortgage Bankers Association for the week ending March 31, the number of mortgage applications for home purchases fell by 4% on a seasonally adjusted basis from the previous week (MBA). On an unseasonal basis, activity is still 35% lower than it was a year ago.
Additionally, fewer first-time buyers applied for purchase loans backed by the Federal Housing Administration and the Department of Veterans Affairs last week.
The most impacted buyers are those who are on the edge of affordability. When interest rates are 4.5% or even 5%, “a borrower may be able to qualify for enough mortgage to participate in her local market, but will likely be shut out of it at 6%.”
Although they are lower than they were a month ago, that is nearly where rates are at the moment. The stubbornly small number of houses for sale, which supports prices, is the other significant barrier for buyers.
For instance, according to information provided by the National Association of Realtors, the supply of unsold inventory in March was at 2.6 months. A 6-month supply is typical in a healthy market, where neither buyers nor sellers have the upper hand.
Additionally, this week saw a drop of almost 1% in the number of single-family homes coming on the market, to only 410,000.