Mortgage rates fall to their lowest level in almost three months | CNN Business (2024)

Mortgageratesfall to their lowest level in almost three months | CNN Business (1)

Mortgage rates are down from their 2024 peak of 7.22%.

Washington CNN

Mortgage rates fell this week to their lowest level since early April, taking some pressure off America’s unaffordable housing market.

The standard 30-year fixed-rate mortgage averaged 6.87% in the week ending June 20, mortgage financing giant Freddie Mac reported Thursday. That’s down from last week’s 6.95% average and marks the third consecutive weekly decline. Rates are down from a 2024 peak of 7.22%.

“Mortgage rates fell for the third straight week following signs of cooling inflation and market expectations of a future Federal Reserve rate cut,” said Sam Khater, Freddie Mac’s chief economist, in a release. “These lower mortgage rates coupled with the gradually improving housing supply bodes well for the housing market.”

The New York Stock Exchange is shown on Tuesday, June 11, 2024. Wall Street stumbled in premarket trading ahead of a busy week of inflation reports and the Federal Reserve's latest interest rate policy decision. Peter Morgan/AP Related live-story The Fed expects to cut rates just once this year

Still, mortgage rates remain higher than anything seen in the decade before 2022, the year the Federal Reserve began to raise interest rates to combat inflation. Borrowing costs are poised to ease this year, but it may not be by much.

Earlier this month, Fed officials penciled in just one interest rate cut for this year, compared to the three they forecast in March. The Fed doesn’t directly set mortgage rates but its actions do influence them through the benchmark 10-year US Treasury yield, which moves in anticipation of the Fed’s policy moves. Economists don’t expect the average mortgage rate to fall below 6% this year.

Homebuilding constrained by high interest rates

While mortgage rates have eased recently, the US housing market overall remains hamstrung by elevated interest rates, which seem to be taking a toll on homebuilding.

New home construction was much weaker than expected in May, according to separate government statistics released Thursday, with a seasonally adjusted annual rate of 1.28 million units in May, the lowest level since 2020 and down by 5.5% from April. That was well below the 1% gain economists projected in a FactSet poll.

Building permits, seen as a forward indicator of future construction, also came in below economists’ expectations. Additionally, sentiment among America’s homebuilders fell in May to its lowest level since December, according to the National Association of Home Builders/Wells Fargo Housing Market Index released Wednesday.

“Persistently high mortgage rates are keeping many prospective buyers on the sidelines,” NAHB Chairman Carl Harris said in a release. “Home builders are also dealing with higher rates for construction and development loans, chronic labor shortages and a dearth of buildable lots.”

A lack of homes on the market has been a longstanding issue for housing in America. Sluggish homebuilding doesn’t help that, but housing inventory has improved in recent months as some Americans part with their homes.

Expensive homes, big down payment

Home prices remain sky-high, which is another key factor exacerbating America’s affordability crisis.

The S&P CoreLogic Case-Shiller US National Home Price Index rose 6.5% in March from a year earlier to a record high, showing strong demand in urban population centers such as San Diego, Los Angeles and New York. It was the sixth time the index has reached a new record high over the past year. The index for April is due next week.

The downtown skyline of Los Angeles, California is seen on January 22, 2024. Mario Tama/Getty Images/File Related article These cities are now so expensive they’re considered ‘impossibly unaffordable’

The annual Demographic International Housing Affordability report, which has been tracking home prices for 20 years, showed that America’s most expensive housing markets are in California. Honolulu, Hawaii’s capital, was also listed as one of the most expensive in the world.

Buyers are also having to come up with a huge down payment that’s roughly double the median salary of a US worker. A median-income household would need to save up more than $127,000 for a down payment to afford a monthly mortgage payment on the typical US home, according to a recent Zillow analysis.

“Saving enough is a tall task without outside help — a gift from family or perhaps a stock windfall. To make the finances work, some folks are making a big move across the country, co-buying or buying a home with an extra room to rent out,” Skylar Olsen, chief economist at Zillow, said in a release.

Mortgage rates fall to their lowest level in almost three months | CNN Business (2024)

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