Following a string of steady increases, mortgage rates finally fell last week, providing some relief to home shoppers worried about being priced out of the market.
The average 30-year mortgage rate fell to 5.70% this week, down from 5.81% a week ago, housing finance giant Freddie Mac reported on Thursday. Rates are still way up compared to one year ago though. This time last year, the 30-year rate was averaging 2.98%.
Mortgage rates tend to mirror 10-year Treasury yields, which have fallen as investors seek safer, more stable assets in the face of higher inflation and slower economic growth.
“Rising prices are eating into consumers’ paychecks, leaving many Americans with less money for discretionary spending,” said George Ratiu, senior economist at Realtor.com. “In addition, with inflation outpacing pay raises, most workers are seeing their income fall behind, further straining the finances of buyers who are also facing higher borrowing costs.”
Freddie Mac economist Sam Khater said the falling rates were due to “countervailing forces” of high inflation and the increasing prospect of an economic recession. “This pause in rate activity should help the housing market rebalance from the breakneck growth of a seller’s market to a more normal pace of home price appreciation,” he added.
While it may be ominous for the economy, buyer’s who’re in a hurry to purchase a home have enjoyed immediate benefits, said Austin real estate agent Lilly Rockwell. She told MoneyWise that the market is already favoring buyers and that she has just helped one client negotiate a deal under list price.
“It's fabulous. Finally. Tons of choices, very little competition,” she said in a tweet Thursday.
Rockwell said she is now advising her buyer clients to ask for seller credits, which are a cash payment given by the seller to the buyer at closing, to help them buy down their mortgage rates. What that means is making an upfront payment to the lender to reduce the long-term interest costs. Seller credits can help cash-light buyers to do this.
Rockwell said she plans to deploy this strategy herself on a listing she has coming up next week, in an effort to proactively address her client’s concerns over interest rates. Up until recently, sellers wouldn’t have countenanced such offers given how intense the competition was among buyers.
“It's crazy how quickly the tables have turned,” Rockwell said.