Mortgage rates are falling again, but there are other hurdles for homebuyers

Mortgage rates fell for the fourth week in a row, giving homebuyers a little more comfort. But bigger declines may be needed to offset other challenges facing buyers this spring.

The average rate on a 30-year fixed mortgage fell to 6.28% from 6.32% a week earlier. Freddie Mac. Rates have fallen by about a half-point over the past month, reflecting a decline in 10-year Treasury yields since early March — first kicked off by the banking crisis and then sustained by signs that inflation may be cooling.

While the downturn eases pressure on buyers, the continued lack of inventory for sale hampers the ability to snap up a home. Prices have not fallen enough to maintain housing affordability for many owners to list their homes.

“Affordability and availability of housing are the biggest hurdles for buyers in today’s market, although both are driven by mortgage rates,” Zillow Senior Economist Jeff Tucker told Yahoo Finance. “Many homeowners are unwilling to jump into a tight, expensive market with their current home and low monthly payments.”

Despite low rates, buyers aren’t buying — or can’t.

According to data for the week ended March 31, the volume of mortgage applications for home purchases fell 4% on a seasonally adjusted basis from a week earlier. Mortgage Bankers Association (MBA) Activity is 35% lower than a year ago.

Purchase applications for loans backed by the Federal Housing Administration and Veterans Affairs — popular among first-time buyers — fell last week.

“Affordable buyers are the most affected,” Keith Cumbinger, vice president of mortgage website HSH.com, told Yahoo Finance. 4.5% or even 5%, but it stops at 6%.

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Although prices are lower than they were a month ago, this is almost where they are now. Another big deterrent for buyers is the stubbornly low number of homes for sale, which is helping to drive up prices.

“Spring is here, but the housing market hasn’t seen the usual burst of listings and purchasing activity that typically marks the season,” Mike Fradantoni, MBA’s chief economist, said in a statement.

For example, unsold inventory in March was 2.6 months’ supply Data published by the National Association of Realtors. A healthy market – where neither buyers nor sellers have the upper hand – usually has a 6-month supply.

Additionally, only 410,000 single-family homes came on the market this week, down nearly 1% from the previous week. Altos Research.

A for sale sign stands in front of a home in Westwood, Calif., Tuesday, Oct. 6, 2020 (AP Photo/Steven Cheney)

A big part of the inventory problem is that homeowners who typically sell are put off because of prices. According to Redfin, 85% are homeowners As of September 2022, the ratio was less than 6%.

“Just like buyers buy for a reason, sellers sell for a reason,” Cumbinger said. “Certainly, a homeowner is less willing to give up a record-low rate for a mortgage if they’re moving sideways or moving. Above, so it might give everyone some pause.

Sellers who put their home on the market are reluctant to offer discounts as prices fall and inventory is scarce, another frustration for buyers. For example, Latest Redfin data The average asking price has continued to rise since January.

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“We’re getting multiple offers again, no offers from sellers, and buyers going back to auctions,” Real Estate Group president Adriana Pereszica previously told Yahoo Finance. “As competition increases, sellers notice and are less willing to negotiate.”

Rebecca is a reporter for Yahoo Finance and previously worked as an investment strategist Certified Public Accountant (CPA).

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