Mortgage rates drop to lowest level since May

Washington, DC (CNN) 鈥� After moving higher the past two weeks, mortgage rates fell聽this week, dropping to the their lowest level since May 2023.

The 30-year fixed-rate mortgage averaged 6.60% in the week ending January 18, down聽from 6.66% the previous week, according to data from Freddie Mac released Thursday. A year ago, the average 30-year fixed-rate was 6.15%.

Mortgage rates remain more than a full percentage point lower than their highest levels of last year: 7.79%. That鈥檚 improving affordability for homebuyers who鈥檝e been struggling in one of聽

鈥淭his is an encouraging development for the housing market and in particular first-time homebuyers who are sensitive to changes in housing affordability,鈥� said Sam Khater, Freddie Mac鈥檚 chief economist, in a statement.

However, he added, as more buyers come in off the sidelines attracted by lower rates, more pressure will be placed on already depleted inventory for sale. That is expected to keep prices elevated.

Affordability may improve, but challenges expected to remain for homebuyers

鈥淔alling rates are definitely a positive for buyers, but a focus on rates alone misses just how challenging the market will continue to be for prospective homebuyers in 2024,鈥� said Lisa Sturtevant, chief economist for Bright Multiple Listing Service, which serves six states on the Atlantic seaboard and Washington, DC.

However, inventory remains at historical lows. And while more available homes will come to market, narrowing the gap between the rate homeowners currently have and the market rate, a flood of new listings is not expected. That supply and demand imbalance is expected to keep home prices elevated.

鈥淲e should not expect home prices to stay flat as mortgage rates decline,鈥� said Sturtevant, adding that last year the median home sale price nationally increased by more than 1%, with a similar price increase forecasted for 2024. 鈥淚n some markets, however, prices will rise much faster this year.鈥�

Still, lower rates can improve affordability by reducing the costs of financing a home.

鈥淥n a loan to purchase a $400,000 home, a one percentage point decrease in mortgage rates can lead to a $250 drop in the typical monthly payment,鈥� Sturtevant said.聽鈥淏ut it will continue to be a very competitive market for homebuyers in 2024.鈥�

The-CNN-Wire