Mortgage rates fall for the third week in a row to less than 7%.

Washington
CNN
—

Mortgage rates fell for the third week in a row, good news for Americans dealing with a still-difficult housing market.

The standard 30-year mortgage averaged 6.94%. for the week ending May 23, down from last week’s average of 7.02%, according to Freddie Mac data released Thursday. This is the lowest level since early April and below the key 7% threshold.

After moving sideways throughout March, mortgage interest rates began to rise in late April, as economic data showed the inflation slowdown earlier in the year had stalled. Mortgage rates track the benchmark 10-year U.S. Treasury yield, which moves in anticipation of the Federal Reserve’s interest rate decisions.

Stubbornly high inflation this year has dashed hopes that the Fed might cut interest rates in the spring or summer. But there was finally some good news on that front: the April Consumer Price Index, which was released last week, Show that inflation has not risen. Bond yields have mostly fallen this month.

“Spring homebuyers got a windfall this week, as mortgage rates fell below the seven percent threshold for the first time in more than a month,” Sam Khater, chief economist at Freddie Mac, said in a statement.

Some Fed officials said earlier this week that They likely will not raise interest rates Again, a few of them said they expected interest rates to be cut this year. This bodes well for low mortgage rates.

But for now, the housing market recovery remains stagnant. Sales of previously owned homes, which make up the vast majority of the housing market, fell in April for the second straight month, the National Association of Realtors reported Wednesday. This is a stark contrast from earlier in the year when sales rose.

Mortgage rates are down from the two-decade highs they reached last fall, but they are still higher than anything seen in the decade leading up to 2022. And that’s not the only major issue besetting the housing market.

Another reason is the persistent shortage of housing supply that is simply not keeping up with demand, despite some steady improvements in recent months. This is in part because some homeowners have decided not to sell their homes because they are holding on to the low mortgage rates they held in place before the Fed started raising interest rates in 2022. As mortgage rates continue to rise, some homeowners have decided to stay put.

The pace of housing construction is also not sufficiently relieving pressure on the housing market to meaningfully improve affordability. Housing starts rebounded in April to a seasonally adjusted annual rate of 1.36 million units, after a sharp decline the previous month, according to a separate report released last week. But the trend is nowhere near where it should be to make the market easier for many Americans.

“The country needs about 1.6 million or more for a few years to truly balance the housing sector,” Lawrence Yun, chief economist at NAR, said in a statement.

“The housing shortage is not going away,” he said.

However, some steps have been made in the right direction. Housing supply continued to improve in April for the fourth straight month, NAR reported Wednesday. Total housing inventory at the end of April was 1.21 million units, up 9% from the previous month and 16.3% from a year earlier, according to NAR data, although Yoon said “we still have limited inventory.”

Home prices are still painfully high

Another hurdle is that home prices remain painfully high and out of reach for many Americans, especially first-time buyers.

NAR reported Wednesday that home prices It continued to rise in AprilWith the median current home price rising 5.7% from the previous year to $407,600. This was the fourth consecutive monthly expansion and was a record high for April prices.

Other measures of home prices showed the same thing: U.S. home price growth rose in February at the fastest annual pace since November 2022, according to the S&P CoreLogic Case-Shiller National Home Price Index. Home prices in San Diego, Chicago and Detroit rose the most in February.

High borrowing costs coupled with rising prices and not enough homes on the market have created a difficult housing market for many. President Joe Biden has He suggested some solutions To improve affordability, which requires congressional approval, such as tax breaks for middle-class buyers and legislation to support housing construction.

This story has been updated with additional details and context.