After Five-Week-Slide, Mortgage Rates Reverse Course

After five weeks of decline, Freddie Mac reports the 30-year fixed-rate mortgage (FRM) averaged 6.39% as of April 20, 2023, up from last week when the FRM averaged 6.27%. A year ago at this time, the 30-year FRM averaged 5.11%.

“For the first time in over a month, mortgage rates moved up due to shifting market expectations,” said Sam Khater, Freddie Mac’s Chief Economist. “Home prices have stabilized somewhat, but with supply tight and rates stuck above 6%, affordable housing continues to be a serious issue for many potential homebuyers. Unless rates drop into the mid-5% range, demand will only modestly recover.”

Also this week, the 15-year FRM averaged 5.76%, up from last week when it averaged 5.54%. A year ago at this time, the 15-year FRM averaged 4.38%.

“Mortgage rates are the product of the larger economic environment, including inflation and employment data as well as banking stability and the Fed’s actions,” added Realtor.com Economic Data Analyst Hannah Jones. “Recent data points to a still-resilient, though cooling economy, leading many to believe the Fed will elect to raise the target rate at next month’s meeting. As investors responded to relatively healthy economic indicators, bond yields ticked higher, taking mortgage rates with them.”

And as mortgage rates took an upward turn for the week, the Mortgage Bankers Association (MBA) reported an expected downturn in overall app volume, dipping 8.8% week-over-week.

“Last week’s jump in mortgage rates led to a pullback in mortgage applications, as homebuyers remain sensitive to rate movements,” noted MBA President and CEO Bob Broeksmit. “The lack of housing inventory this spring buying season is also keeping many prospective buyers on the sidelines. While MBA expects mortgage rates to fall to around 5.5% by the end of this year, more housing supply is needed to improve affordability and meet demand.”

The nation’s housing supply continues to shrink, according to Redfin, as new listings are growing scarce, with new listings falling 21.8% from a year earlier nationwide during the four weeks ending April 2, one of the biggest drops since the start of the pandemic–contributing to an unseasonal early-spring decline in the total number of homes for sale.

As Redfin Deputy Chief Economist Taylor Marr explained, “Today’s serious homebuyers have grown accustomed to the idea of a 5% or 6% rate and have adjusted their budgets accordingly. The lack of homes hitting the market explains why the market is moving fast even though sales are still down. The lack of new listings is also one reason why sales are down: Buyers can’t buy if sellers don’t want to sell.”

Jones continued, “One year ago, mortgage rates reached 5% for the first time since 2011. Rates have remained above 5% for all but one week since reaching that level. Last year’s persistent mortgage rate climb, combined with inflation and home price growth, led many buyers to retreat from the housing market. And while spring is typically a season marked by a lively housing market, this year is proving to be less energetic than previous ones. Nevertheless, buyer demand shows signs of improvement with each gain in affordability. However, housing demand remains largely stifled as many buyers wait on the sidelines until the cost of purchasing a home becomes more doable.”