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Mortgage rates fell this week, but homebuyers are waiting for bigger reductions before entering the luxury home market.
The average interest rate on a 30-year mortgage was still below 7%, but not by much, settling at 6.91% on Thursday, according to Mortgage News Daily.
Another measure that tracks the weekly average interest rate on 30-year loans fell slightly to 6.79% from 6.87% the previous week, according to Freddie Mac.
But homebuyers have largely dismissed this week’s modest decline as they wait for the U.S. Federal Reserve to cut interest rates, raising the prospect of a rate cut at the central bank’s June meeting. There are enough. Not only would financing be cheaper, but more sellers could be encouraged to list their homes. This is a double win for those who are holding back due to affordability difficulties.
“Purchase offers remain largely unchanged as homebuyers continue to seek lower mortgage rates and more listings on the market,” said Joel Kang, vice president and deputy chief economist at the Mortgage Bankers Association. said.
Homebuyers expect relief from rising home prices
Both mortgage applications and home purchase applications were flat last week as consumers looked forward to more affordability relief later this year.
“Lowering interest rates should help release additional inventory as the lock-in effect is reduced, but we expect that to happen only gradually,” Kang said. “Similarly, with interest rates remaining high, there is little incentive to refinance rates or terms at this time.”
Many buyers, especially first-time buyers, are in need of lower housing costs. S&P CoreLogic Case Shiller reported earlier this week that U.S. home prices rose 6% in January compared to the same month last year.
Brian Luke, head of commodities, physical and digital assets at S&P Dow Jones Indices, said this is the “fastest annual rate of return since 2022.”
Southern California is experiencing extreme heat
Two Southern California cities topped the home price growth chart, with San Diego rising 11% in January, the highest annual increase among the 20 cities. Los Angeles followed with a nearly 9% increase. Detroit had him at just over 8% and he was third.
In Los Angeles, the prospect of lower interest rates prompted homebuyers to return to the market. Buyers in this competitive market want to secure a home now instead of waiting like in other parts of the country.
“The Fed announced interest rate cuts a few months ago, so there’s a lot of competition in Los Angeles,” Nicole Han, a real estate agent in Los Angeles, told Yahoo Finance. [a home] And just refinance. ”
Bumpy ride up to the cut
The Fed left its benchmark interest rate unchanged at its March meeting because inflation was higher than expected. The central bank interest rate has been hovering in the range of 5.25% to 5.50%, the highest level since 2001.
Fed Chairman Jerome Powell said monetary policy could start easing “at some point this year,” but he did not give an estimated timeline. Meanwhile, market participants are hopeful that the first rate cut could come in June.
Rebecca Chen is a reporter for Yahoo Finance and previously worked as an investment tax certified public accountant (CPA).
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