decline in long-term mortgage rates in the United States; more houses on the market

(Bloomberg) – US mortgage rates fell slightly for the third straight week of declines.

The average for a 30-year loan was 5.09%, down slightly from 5.1% last week, Freddie Mac said in a statement Thursday.

Buyers have gotten a bit of a break in recent weeks following the massive rise in mortgage rates that has dominated this year. Borrowing costs are still up nearly 2 percentage points from the end of 2021, an increase that is starting to have a cooling effect on the housing market. Nearly one in five sellers cut listing prices in the four weeks ending May 22, the highest level since October 2019, Redfin Corp said. last week in a report.

“Mortgage rates have continued to decline slightly this week, but are still significantly higher than last year, affecting affordability and buying demand,” said Sam Khater, chief economist at Freddie Mac, in the communicated. “As summer approaches, the pool of potential buyers has shrunk, supply is up and the housing market is normalizing. This is good news after unprecedented tension in the market over the past two years. »

At the current 30-year average, a borrower with a $300,000 mortgage would pay $1,627 a month, or $344 more than at the end of last year.

More homes are coming to market

Meanwhile, home listings rose for the first time since June 2019, data from Realtor.com showed, suggesting U.S. housing supply hit a turning point last month.

The number of active listings rose 8% year over year in May, likely due to new sellers and a slowdown in the number of potential buyers discouraged by high prices, Realtor.com said. in a report Thursday. The biggest increases in new listings were in the West and South, in cities like Austin, Texas and Phoenix.

Still, rising inventories don’t necessarily mean the housing market’s exuberance is waning. Listings remain 48.5% below their May 2020 level and price increases have accelerated in recent months.

“While this real estate refresh is welcome news in a still undersupplied market, it has yet to dampen home price growth,” said Danielle Hale, chief economist at Realtor.com, in The report.

The median listing price in the United States hit a record high of $447,000 in May, after crossing the $400,000 threshold in March. And buyers made purchases faster than any month in Realtor.com’s historical data since July 2016.

Still, soaring mortgage rates and an easing economic outlook may have reduced the number of buyers and made the bidding wars less exuberant. In a first sign, the rate of sellers making price cuts accelerated in May, Hale said.

House prices continue to rise

Consumers have faced an increasingly difficult affordability situation in recent years as prices have soared during the pandemic. The S&P CoreLogic Case-Shiller index released on Tuesday suggests that price gains continued to accelerate over the year through March. Home price growth in 20 U.S. cities accelerated for the fourth consecutive month, with Tampa posting the largest gains.

A measure of prices in those 20 cities climbed 21.2% through March after a 20.3% gain in February. All 20 cities reported double-digit price increases for the year ended March, and prices in Tampa jumped 34.8%, according to a statement. Boston posted a 14.5% year-over-year price increase. Only Chicago, New York, Minneapolis and Washington, DC saw smaller increases.

“Those of us who were anticipating a deceleration in the rate of growth of U.S. home prices will have to wait at least another month,” Craig Lazzara, managing director of S&P Dow Jones Indices, said in the release.

The index, which is based on research by economists Robert Shiller and Karl Case, is an important indicator of the health of the U.S. housing market, in part because of the breadth of its measures in the United States and the more than 27 years of historical data.

“The strength in house prices may come as a surprise given the spike in mortgage interest rates over the past two months,” Matthew Pointon, senior real estate economist at Capital Economics, said in a statement to clients on Tuesday. “But note that Case-Shiller takes an average of the price of homes sold over the previous three months (i.e. January through March), and at the time, demand for homes was still strong.”

Nationally, prices rose 20.6%, but Lazzara of the S&P Dow Jones Indices warned that a deceleration could be on the horizon.

“Mortgages are becoming more expensive as the Federal Reserve has begun to raise interest rates, suggesting that the macroeconomic environment may not support the extraordinary growth in house prices for much longer,” Lazzara said. . “While it can be safely predicted that price gains will begin to slow, the timing of the deceleration is a tougher choice.”

With inventories still tight, an outright decline in price growth is unlikely, according to Capital Economics’ Pointon. He expects annual growth to slow to around 9% by the end of this year.

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