Mortgage rates fell for the sixth consecutive week, but housing activity remained muted as the holiday approached.
The average 30-year fixed mortgage rate fell to 6.27% from 6.31% in the previous week, according to . Interest rates have fallen by more than three-quarters of a point since mid-November after the Fed indicated it would slow rate hikes amid slowing inflation.
However, prices remain 3 percentage points higher than they were at the start of the year, leaving many first-time buyers on the sidelines and sellers – who haven’t checked out their listings – more willing to negotiate.
“With the holidays approaching, mortgage rates have continued to drop,” Sam Khater, chief economist at Freddie Mac, said in a press release. “Prices have fallen significantly over the past six weeks, which is beneficial for potential homebuyers, but new data suggests that homeowners are reluctant to list their homes. Many of these homeowners are carefully weighing their options as more than two-thirds of current homeowners have A fixed mortgage rate of less than 4%.”
Housing affordability remains a challenge
Mortgage demand improved slightly from the previous week, according to the Mortgage Bankers Association for the week ending Dec. 16, but buying activity was down 3% from the previous week. Overall, orders are down 36% from a year ago, according to MBA, as most high-priced buyers chose to wait longer.
“A slowdown in buyer activity is typical for this time of year,” Scott Sheldon, affiliate director of New American Funding, told Yahoo Money, adding that buyers like to stay until after the holidays are over to get back into their buying plans.
However, the slowdown in the housing sector began well before the holiday season, with many buyers spooked by mortgage payments and high interest rates, with “first-time buyers being hit the hardest,” Sheldon said.
Accordingly, the national average mortgage payment was $1,977 in November. While that’s down from $2,012 in October, the average payment is still 42.9% higher — or $594 more per month — than it was at the start of the year.
“As a buyer, increasing interest rates from an average of 3% to a 6.50% loan is challenging,” said Sheldon. “It’s what people are facing right now and the only way they can make up for that is by negotiating the purchase price.”
Sellers have lowered the list price
Many sellers who are unwilling to negotiate or lose their current low mortgage rate forego selling altogether.
Redfin data showed that 2% of homes for sale were pulled from the market each week on average in the 12 weeks leading up to November 20, compared to 1.6% a year earlier. The write-down ratio improved to 1.9% in the 12 weeks ended November 27.
However, sellers who are still in the market often lower prices.
The share of homes that were price-slashed rose in November, up from 9.2% a year earlier, according to Realtor.com. About 37% of construction companies cut their prices last month, up from 26% in September, according to , with an average price cut of 6%.
Overall, the national average listing price fell to $416,000 in November, according to .com, down from $425,000 in October and from a June high of $449,000.
According to Mike Fratantoni, MBA’s chief economist and senior vice president of research and industry technology, it will take some time before home prices return to normal again.
“Home prices should remain roughly constant nationally and this trend will continue into 2024,” Fratantoni told Yahoo Money. “Home prices aren’t going to run away from buyers the way they’ve been for the last couple of years and prices will go down – but it’s going to be a weaker economy, so that’s going to be a challenge for some buyers.”
Gabriella is a personal financial correspondent at Yahoo Money. Follow her on Twitter @employee.
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