Mortgage rates fell in the week ending Jan. 18, dropping to the lowest level recorded in seven months.
The 30-year fixed-rate mortgage dropped to 6.60% this week, down from 6.66% the week prior, according to data from Freddie Mac published Thursday. The rate fell after moving higher in the past two weeks. It also marks the lowest level reported since May 2023 where rates hovered around 6.57%.
The mortgage rate for the 15-year term also dropped this week to 5.76% from last week's 5.87%. Unlike the rate for 30-year terms, the numbers for the 15-year mortgage have dropped consistently since peaking at 7.03% in November 2023.
"Mortgage rates decreased this week, reaching their lowest level since May of 2023. This is an encouraging development for the housing market and, in particular first-time homebuyers who are sensitive to changes in housing affordability." Sam Khater, Freddie Mac's chief economist, said in a statement.
Homebuilder Sentiment Surges
As mortgage rates continued to drop, homebuilder confidence surged, specifically for newly-built single-family homes, where the index rose by seven points to 44, per data from the National Association of Home Builders/Wells Fargo Housing Market Index published Wednesday.
"Single-family starts are expected to grow in 2024, adding much-needed inventory to the market," Alicia Huey, NAHB Chairman, said.
Despite falling mortgage rates and surging homebuilder confidence, the real estate market is still expected to see challenges as it lacks supply to meet the rising demand and as builders battle against the cost and availability of building materials.
"Falling rates are definitely a positive for buyers, but a focus on rates alone misses just how challenging the market will continue to be for prospective homebuyers in 2024," Lisa Sturtevant, chief economist for Bright Multiple Listing Service, said, as quoted by CNN Business.
In an effort to boost home sales, builders have dropped their prices by up to 6%. Some builders have also offered sales incentives of all forms to close more sales. This, however, may not last long as the year goes on, according to Robert Dietz, NAHB's chief economist.
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