Mortgage Rates Continue to Fall, Inventory Remains Low

Mortgage rates have fallen now for the third week in a row, according to data from Freddie Mac released today. While this is great news for prospective buyers the spring homebuying season is facing one serious challenge: low inventory.

The 30-year fixed-rate mortgage averaged 6.32% this week, down from 6.42% the week before. A year ago, the 30-year fixed rate was 4.67%. "Economic uncertainty continues to bring mortgage rates down," said Sam Khater, Freddie Mac's chief economist. "Over the last several weeks, declining rates have brought borrowers back to the market but, as the spring homebuying season gets underway, low inventory remains a key challenge for prospective buyers."

Last week the Fed raised interest rates by a quarter point in an effort to fight stubbornly high inflation. The Fed does not set the interest rates on mortgages directly but its actions influence them. Mortgage rates tend to track the yield on 10-year US Treasury bonds, which move based on a combination of anticipation about the Fed's actions, what the Fed actually does and investors' reactions. When Treasury yields go up, so do mortgage rates and when they go down, mortgage rates tend to follow.  The recent banking turmoil has helped to cool inflation. While inflation is still quite high, it is slowing and analysts are anticipating a much slower economy over the next few quarters which should further bring down inflation. This is good for mortgage borrowers who can expect to see rates retreating through the end of the year, according to Mike Fratantoni, Mortgage Bankers Association senior vice president and chief economist. 

The MBA forecasts that mortgage rates are likely to trend down over the course of this year, with the 30-year fixed rate falling to around 5.3% by the end of the year. “The housing market was the first sector to slow as the result of tighter monetary policy and should be the first to benefit as policymakers slow — and ultimately stop — hiking rates,” said Fratantoni.

While this is all good news for homebuyers low inventory remains a challenge. Napa, for example, has 36% less inventory than we did last year at this time. What sellers should know if they are considering putting their house on the market is that demand is still out there and increasing. According to the NAR, pending home sales have increased for three consecutive months and applications for home purchases, while still well below levels from a year ago, have increased for four consecutive weeks, according to the Mortgage Bankers Association. In Napa, inventory is sufficiently low to keep us in the seller’s market zone through the spring and prices have been moving upward as a result.

If you are thinking of selling now is a great time to capitalize on increasing buyer demand and lower rates. To find out how much your home could sell for in today's market contact me for a complimentary home valuation.

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