With volatile mortgage rates driving home buyers from the market, economists are skeptical that a dip in borrowing costs this week will have a meaningful impact. The 30-year fixed-rate mortgage fell to an average of 5.3%—still nearly double what it was a year ago—for the week ending July 28, according to Freddie Mac.
“Purchase demand continues to tumble as the cumulative impact of higher rates, elevated home prices, increased recession risk and declining consumer confidence take a toll on home buyers,” says Sam Khater, Freddie Mac’s chief economist. “It’s clear that over the past two years, the combination of the pandemic, record low mortgage rates and the opportunity to work remotely spurred greater demand. Now, as the market adjusts to a higher rate environment, we are seeing a period of deflated sales activity until the market stabilizes.”
The National Association of REALTORS® reported this week that contract signings were down 20% in June compared to a year earlier. NAR is forecasting that by the end of 2022, home sales will have fallen 13% on an annual basis. “With mortgage rates expected to stabilize near 6% and steady job creation, home sales should start to rise by early 2023,” Lawrence Yun, chief economist for the National Association of REALTORS®, said Wednesday during NAR’s quarterly Real Estate Forecast Summit.
Freddie Mac reports the following national averages for mortgage rates for the week ending July 28:
- 30-year fixed-rate mortgages: averaged 5.30%, with an average 0.8 point, dropping from last week’s 5.54% average. Last year at this time, 30-year rates averaged 2.80%.
- 15-year fixed-rate mortgages: averaged 4.58%, with an average 0.8 point, falling from last week’s 4.75% average. A year ago, 15-year rates averaged 2.10%.
- 5-year adjustable-rate mortgages: averaged 4.29%, with an average 0.3 point, dropping from last week’s 4.31% average. A year ago, 5-year ARMs averaged 2.45%.