Yahoo Autos Mortgage rates rise for the first time since May
The average rate on a 30-year loan increased to 6.95% this week, according to Freddie Mac.
The national average on the 30-year, fixed-rate mortgage rose to 6.95% from 6.86% a week prior, Freddie Mac reported on Wednesday. The increase snaps a four-week streak of rate declines and pushes rates back to their level in mid-June.
A year ago, the average rate on a 30-year, fixed-rate loan was 6.81% Freddie Mac said. Meanwhile, the average rate on a 15-year, fixed-rate mortgage also rose, climbing to 6.25% from 6.16%. A year ago, the average for 15-year, fixed-rate loans was 6.24%.
With rates stuck at or near 7% for the past year, homeowners with lower-rate mortgages, which they took out during or before the COVID-19 pandemic, have been reluctant to list their homes.
That has contributed to a housing inventory shortage, driving prices higher and helping to create affordability problems.
Lawrence Yun, chief economist at the National Association of Realtors, said that even with rates stuck at higher levels, there is some reason to believe the inventory shortage could ease.
"We are on the cusp of a recovery," Yun told Yahoo Finance before the weekly rate data was released. "We are beginning to see some people begin to give up their 3% mortgage rate because of life-changing circumstances."
More inventory is expected to come onto the market as Americans will need a new home for newborns, new schools, retirements, and deaths, Yun said.
Read more: Mortgage rates today, July 3, 2024: Rates increase across the board
Rising inventory meets sluggish demand
The number of homes available for sale increased nearly 20% annually to 1.28 million in May, according to the National Association of Realtors (NAR). This rise marks the highest inventory level in almost three years. Month over month, inventory is up almost 7%.
At the current existing home sales pace, it would take 3.7 months to sell all listed homes, according to the NAR. This is the slowest since 2020, indicating a market that is shifting toward buyers.
Still, rising inventory has so far failed to attract more homebuyers. The Mortgage Bankers Association's latest Market Composite Index, which tracks mortgage loan application volume, increased by less than a percentage point last week. New mortgage application activity climbed 1% from the week prior but remained 13% lower than the same week a year earlier.
Housing experts are attributing depressed demand to record-high home prices. Median sales price reached $419,300 in May, according to the National Association of Realtors. Existing home sales have also lagged, dropping 0.7% in May.
At the current average rate, a homebuyer would pay about $2,220 monthly on a median-priced home with a 20% down payment, according to the Yahoo Finance mortgage calculator. This is nearly $800 more than when rates hovered around 3% in 2021.
Read more: Mortgage rates hover around 7% — is this a good time to buy a house?
However, homebuyers could see some affordability return as more supply fuels the housing market.
"As more choices come onto the market,” Yun said, “home prices will begin to stabilize."
Rebecca Chen is a reporter for Yahoo Finance and previously worked as an investment tax certified public accountant (CPA).
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