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Mortgage rates continued to trend downward this week, as Freddie Mac reported the 30-year fixed-rate mortgage (FRM) slid down to 2.90%, dropping eight basis points from last week’s total of 2.98%. A year ago at this time, the 30-year FRM averaged 3.03%.
“Mortgage rates decreased this week following the dip in U.S. Treasury yields. While mortgage rates tend to follow Treasury yields closely, other factors can be impactful such as the labor markets, which are continuing to improve per last week’s jobs report,” said Sam Khater, Freddie Mac’s Chief Economist. “We expect economic growth to gradually drive interest rates higher, but homebuyers and refinance borrowers still have an opportunity to take advantage of 30-year rates that are expected to continue to hover around 3%.”
As rates slid to levels still below the 3% mark, the Mortgage Bankers Association (MBA) also reported mortgage applications decreased 1.8% week-over-week for the week ending July 2, 2021, as apps dropped for the second consecutive week.
Affordability remains an issue for many homebuyers, as analysts at Black Knight have reported home prices have grown to astronomical levels—at almost 18% year-over-year, with May’s home price growth dwarfing April’s, which was a steep 14.8%.
Last week, the Bureau of Labor Statistics (BLS) reported that the American economy added 850,000 jobs in the month of June. Unemployment claims this week saw a slight rise, as for the week ending July 3, the advance figure for seasonally adjusted initial unemployment claims was 373,000, an increase of 2,000 from the previous week’s revised level.
“First-time buyers are hitting a wall in many places around the country as the pace of home price rises outpace the benefits of lower borrowing costs. Younger and first-time buyers, including younger millennials, are faced with the challenge of having sufficient savings for a down payment, closing costs and cash reserves,” said Frank Martell, President and CEO of CoreLogic. Martell was commenting on CoreLogic’s latest Home Price Index (HPI) and HPI Forecast for May 2021 which found that nationally, home prices increased 15.4% in May 2021, compared to May 2020, as the supply to demand imbalance continues.
“As we look to the balance of 2021, we expect price rises to continue which could very well push prospective buyers out of the market in many areas and slow home price growth over the next year,” added Martell.