Prospective home buyers can add lower Treasury yields to their gratitude lists this Thanksgiving holiday. Mortgage rates in the past week fell to their lowest level since mid-September, continuing a slump that coaxed some home buyers off the sidelines.
The average 30-year fixed mortgage rate was 7.29% this week, according to
Freddie Mac
‘s weekly data. That’s the lowest level since the week ended Sept. 21, and half a percentage point lower than the gauge’s recent peak at 7.79%. This week’s data was released today, and is adjusted for the Thanksgiving holiday tomorrow.
“In recent weeks, rates have dropped by half a percent, but potential home buyers continue to hold out for lower rates and more inventory,” Sam Khater, Freddie Mac’s chief economist, said in a statement. “This dynamic is reflected in the latest data showing that existing home sales have fallen to a thirteen-year low.”
Home sales in October dropped to their slowest pace in 13 years, the National Association of Realtors said earlier this week, as higher interest rates and mortgage rates have challenged prospective buyers.
Mortgage rates climbed rapidly from August through October as inflation expectations and geopolitical uncertainty roiled bond markets. But economic data in recent weeks has driven the 10-year Treasury yield—with which mortgage rates often move—lower, resulting in a respite for prospective buyers.
“U.S. bond yields continued to move lower as incoming data signaled a softer economy and more signs of cooling inflation,” Joel Kan, the Mortgage Bankers Association’s deputy chief economist, said in a press release.
Such declines in bond yields—and mortgage rates—have resulted in increased demand for home loans. Total mortgage application volume rose 3% last week, the association said Wednesday. “Mortgage applications increased to their highest level in six weeks, but remain at very low levels,” Kan said. The group’s index tracking home purchase demand gained a seasonally adjusted 4% from the week prior but remained 20% lower than year-ago levels.
Two measures of contract signings expected next week will give economists a fuller picture of how higher rates impacted demand in October. Because of the time it takes for a home to close, it can be a month or two before a pending sale shows up in existing-home sale data. Consensus estimates compiled by
FactSet
expect that new homes went under contract at a seasonally adjusted annual rate of 700,000, less than the month prior but 21% above year-ago levels.
The same can’t be said for the broader existing-home market. Economists expect that the National Association of Realtors’ index tracking contract signings for previously owned homes in October to be roughly 9% lower than the same month last year.
Write to Shaina Mishkin at [email protected] and Angela Palumbo at [email protected]
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