Following market trends, mortgage rates dropped this week. According to Freddie Mac, the average rate on a 30-year fixed mortgage fell to 6.33% from 6.48% the previous week. Rates moved closer to 6% as inflation slowed further in December for the sixth straight month. Since their latest peak in mid-November, mortgage rates have decreased by 0.75 percentage points.
The beginning of the new year allows people to start over again and set their resolutions for the year. One of those resolutions may be buying a home. This downward trend of mortgage rates gives a scrap of hope for many home buyers for the months ahead. With a 6% rate instead of 7%, buyers pay about $2,700 less every year on their mortgage. As a result, owning a home becomes affordable to about 1.4 million more renters and 4.3 million more homeowners. This could bring more buyers back to the market, boosting demand for housing and increasing market competition.
Nevertheless, it’s not just affordability that’s a roadblock. There’s also a persistent shortage of homes. Historically, a 6-month supply is necessary for a normal market with enough homes available for active buyers. However, there’s a 3-month supply of homes at the current sales pace. Even with 1.1 million homes available for sale, buyers still have difficulty finding a home to purchase.