What happened to mortgage rates this week
The Freddie Mac fixed rate for a 30-year mortgage climbed 5 basis points this week, to 7.22%, upon still-strong economic data ahead of the Fed meeting. This week’s data marks the fifth consecutive week of increase, with mortgage rates reaching their highest level since late November.
In Wednesday’s meeting, the FOMC voted to hold rates steady and Fed Chair Jerome Powell emphasized, once again, that future rate decisions will be dependent on incoming inflation and employment data.
This means that mortgage rates are not likely to ease significantly until incoming data suggests that inflation is convincingly en route to the Fed’s desired 2% level. Recent data reflects a surprisingly resilient economy, which means rate cut expectations have pushed out further to the back half of the year.
What it means for the housing market
Still-high home prices and climbing mortgage rates have kept the cost of purchasing a home well out of the realm of possibility for many would-be buyers. However, recent housing data suggests the market is slowly moving in a more favorable direction.
Inventory climbed 30.4% annually in April, boosted by an increase in seller activity. Even more promising was the 41.0% increase in homes priced between $200,000 and $350,000 compared with the previous year, fueled by more small and affordable homes in the South.
Though inventory levels are moving in the right direction, the number of homes on the market is still nearly 40% lower than before the COVID-19 pandemic. More homes on the market and lower mortgage rates would help make the cost of purchasing a home more feasible for home shoppers.
Despite still-high housing costs, buyers have kept up activity in affordable areas in the Midwest and Northeast, many of which are highlighted in the latest Wall Street Journal/Realtor.com Housing Market Ranking. The median list price in the top-ranked market, Rockford, IL, was nearly $200,000 lower than the national median in March.
Eager buyers can find creative ways to achieve homeownership in today’s challenging market, whether it be through relocating to a lower-priced area, taking advantage of favorable loan types (such as VA loans), or moving in with family to save money. On the positive side, rents fell annually for the eighth consecutive month in March, offering more affordable housing options for buyers waiting until the market is more tenable.