Mortgage rates have continued to decline, providing some hope for the stagnant real estate market. According to Freddie Mac's latest Primary Mortgage Market Survey, the average rate for a 30-year fixed mortgage fell to 6.67% this week, down from 6.95% the previous week. However, this rate is still higher than the 6.27% recorded a year ago. Similarly, the rate for a 15-year fixed mortgage dropped to 5.95% from 6.38% the previous week, with a year-ago average of 5.69%.
Lower mortgage rates are encouraging potential home buyers who were previously waiting on the sidelines to enter the market. Builders are also feeling the positive effects, as new home construction has reached its highest level since May. This surge in demand and construction is attributed to the current low inventory of homes.
Data from the National Association of Realtors indicates a slight increase of 0.8% in existing home sales in November, following five months of declines. Additionally, the Commerce Department reported a significant 14.8% rise in housing starts last month, signaling progress in the stagnant market.
Despite these positive developments, buyer and seller activity remains relatively low. Realtor.com's senior economic research analyst, Hannah Jones, warns that while recent data suggests a shift towards a more favorable housing market, the return to balance will be slow. Mortgage rates and home prices are still significantly higher than pre-pandemic levels and are projected to remain elevated through next year.
Jones also highlights the persistently high home prices and low inventory, which continue to strain the housing market. The median listing price for homes in the U.S. in November was 37.7% higher than in 2019, while for-sale inventory was 34% lower than before the pandemic.
In summary, while the decline in mortgage rates has sparked some signs of life in the real estate market, affordability is not expected to improve significantly in the near future. The market continues to face challenges due to high home prices and limited inventory, which may hinder a complete recovery.