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After reaching their highest level in over seven years last week, mortgage rates dropped in Freddie Mac’s latest Primary Mortgage Market Survey (PMMS).
The 30-year fixed-rate mortgage (FRM) averaged 4.56 percent for the week ending May 31, down from last week when it averaged 4.66 percent. The 15-year FRM this week averaged 4.06 percent, down from last week when it averaged 4.15 percent. And the five-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 3.80 percent this week, down from last week when it averaged 3.87 percent.
“The decline was driven by recent trade and geopolitical issues, which led to a sudden decrease in long-term Treasury yields,” said Sam Khater, Freddie Mac’s Chief Economist. “Meanwhile, confident American consumers shrugged off the market volatility, as purchase mortgage applications continued to trend higher from a year ago.”
Khater predicted that demand for housing could remain strong into the summer, but a lack of inventory is holding back the market’s full potential.
“Extremely low inventory conditions in most markets are preventing sales from breaking out, while also keeping price growth elevated,” Khater said. “Even if rates climb closer to five percent, sales have room to grow more, but only if current supply levels start increasing more meaningfully.”
And speaking of home sales, the National Association of Realtors (NAR) reported pending home sales dipped in April to their third-lowest level over the past year. NAR’s Pending Home Sales Index (PHSI) dropped by 1.3 percent to 106.4 in April from an upwardly revised 107.8 in March. The index is also down 2.1 percent from one year earlier, which makes April the fourth consecutive month of annualized declines.
On a regional basis, the PHSI in the Northeast remained unchanged in April at 90.6 while the Midwest decreased 3.2 percent to 98.5, the PHSI for the South fell 1 percent to 127.3 and the West PHSI fell 0.4 percent to 94.4.
“Listings are typically going under contract in under a month and instances of multiple offers are increasingly common and pushing prices higher,” said Lawrence Yun, NAR Chief Economist. “The unfortunate reality for many home shoppers is that reaching the market will remain challenging if supply stays at these dire levels.”
