Trend Sparks Optimism, but Affordability Remains a Concern
The real estate market, which has been stagnant for months, is finally showing signs of life as mortgage rates continue to decline. According to Freddie Mac’s latest Primary Mortgage Market Survey, the average rate for a 30-year fixed mortgage dropped to 6.67% this week, down from 6.95% the previous week. While this is an improvement, it is still higher than the 6.27% rate from a year ago. Additionally, the rate for a 15-year fixed mortgage fell to 5.95%, down from 6.38% last week.
Positive Effects on Homebuyers and Builders
The lower rates have attracted potential homebuyers who were previously hesitant to enter the market. Sam Khater, Freddie Mac’s chief economist, stated that the positive effects are already being felt by builders, as home builder confidence rises and new home construction reaches its highest level since May. This surge in activity is a response to the increased demand, as the current inventory of homes remains low.
Market Progress: Existing Home Sales and Housing Starts
Recent data from the National Association of Realtors reveals a slight uptick of 0.8% in existing home sales in November, following five months of declines. Additionally, the Commerce Department reported a 14.8% increase in housing starts last month, signaling progress in the previously stagnant market.
Slow Recovery Expected
Despite the positive indicators, both buyer and seller activity remains near recent lows. Hannah Jones, a senior economic research analyst at Realtor.com, warns that while the housing market is showing some improvement, a return to balance will be gradual. Mortgage rates and home prices continue to be significantly higher than pre-pandemic levels. Jones also notes that the median listing price for homes in the U.S. was 37.7% higher in November compared to 2019, while the available inventory remains 34% lower than before the pandemic.
It is clear that although there are positive developments in the real estate market, affordability remains a significant concern. Mortgage rates may have dropped, but the road to recovery and stability will be a slow and challenging one.