Share
For the second consecutive week, mortgage demand from prospective home buyers rose, showing signs of a livelier housing market unfolding this season. Mortgage loan application volume—a gauge of future homebuying activity—is indexing 18% higher than it was the same week one year ago, the Mortgage Bankers Association says.
Less volatile mortgage rates—steadying in the mid- to high-6% range—and more housing inventory may be prompting more home buyers to come off the sidelines. The overall number of listings has risen by about 20% in the past year, the National Association of REALTORS® says.
Lower Mortgage Rates on the Horizon?
A further decrease in mortgage rates could unleash pent-up buyer demand, economists say, and signs are improving. Earlier this week, the latest Consumer Price Index rose at its slowest pace in about four years, indicating inflation is slowing. Still, the latest 2.3% rate remains shy of the Federal Reserve’s target inflation rate of 2%.
Housing costs are partially to blame for lingering high inflation. “The jumbo heavyweight of inflation is housing costs,” Lawrence Yun, NAR’s chief economist said earlier this week. Shelter costs comprise about one-third of the CPI, and they’re continuing to rise.
“Getting shelter costs under control with more housing supply will be the key to getting overall inflation fully tamed and for the Federal Reserve to ‘normalize,’” Yun says. Normalization, in his view, would mean four to six additional cuts to the benchmark interest rate.
“Fed rate cuts with high inflation will not result in lower mortgage rates,” Yun notes. “However, rate cuts because of falling inflation will mean meaningfully lower mortgage rates.
Mortgage Rates This Week: Still Under 7%
“The 30-year fixed-rate mortgage remained below the 7% threshold for the 17th consecutive week,” says Sam Khater, Freddie Mac’s chief economist.
The following are the national averages of mortgage rates for the week ending May 15:
- 30-year fixed-rate: averaged 6.81%, up from last week when it averaged 6.76%. A year ago, 30-year rates averaged 7.02%.
- 15-year fixed-rate: averaged 5.92%, up from last week when it averaged 5.89%. Last year at this time, 15-year rates averaged 6.28%.
