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The average 30-year US mortgage rate has dropped for the second consecutive week, reaching 6.42%, down from 6.6% the previous week, according to mortgage buyer Freddie Mac. This decrease, paired with stabilizing home prices, could signal a potential rebound for the housing market as the spring homebuying season commences.
In comparison, the average rate one year ago was 4.42%. Despite ongoing market volatility due to recent bank collapses and the Federal Reserve's decision to raise its benchmark lending rate by 25 basis points, there is optimism for a recovering housing market. Freddie Mac's chief economist, Sam Khater, noted that positive developments in homebuyer demand and property prices might lead to a continued resurgence in the coming weeks.
The housing market experienced a significant downturn in 2022, with a 17.8% decrease in existing home sales compared to 2021, marking the most significant annual decline since the housing crisis in 2008. However, the national median home price dropped 0.2% to $363,000, the first annual decline in 13 years, offering some relief to potential buyers.
Long-term mortgage rates reached a two-decade high of 7.08% in the fall, as the Federal Reserve attempted to curb inflation by raising its key lending rate. Policymakers now anticipate raising the key rate only once more, from the current 4.9% to 5.1%, as previously projected in December.
Although the Fed's rate hikes affect borrowing rates for businesses and households, 30-year mortgage rates typically follow the 10-year Treasury yield, which lenders use to price loans. Factors such as investor expectations for future inflation, global demand for US Treasuries, and the Federal Reserve's actions on interest rates can also influence home borrowing costs.
Treasury yields have experienced significant fluctuations since the collapse of two mid-size US banks two weeks ago, with the 10-year yield falling to 3.47% on Thursday.
Prior to the bank collapses, the 10-year yield reached its highest level since 2007 at 5.07%. The rate for a 15-year mortgage, favoured by homeowners refinancing their properties, has also declined this week to 5.68% from 5.9% the previous week, compared to 3.63% one year ago.
In conclusion, the recent decrease in mortgage rates, combined with stabilizing home prices, brings hope for a revitalized housing market during the upcoming spring homebuying season. As the market responds to these changes, potential homebuyers may find more favourable conditions for purchasing properties in the coming weeks.
However, it is essential to keep an eye on economic indicators and the Federal Reserve's actions, as these factors can significantly impact mortgage rates and the overall housing market. As the spring homebuying season unfolds, buyers and sellers should remain vigilant and adapt their strategies accordingly to navigate this dynamic market.
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