Mortgage Rates Drop As Housing Market Begins To Cool

Mortgage Rates Drop As Housing Market Begins To Cool

Mortgage rates fell for the second week in a row, giving buyers another shot at savings during the summer homebuying season.

The 30-year, fixed-rate mortgage averaged 5.3% for the week ending July 7, down 40 basis points—one one-hundredth of a percent—from 5.7% the previous week, according to Freddie Mac. The 30-year fixed rate has fallen more than 50 basis points in the last two weeks as looming fears of a recession grow.

The average 15-year, fixed-rate mortgage was 4.45% this week, down 38 basis points from last week. The  5/1 adjustable mortgage continues to offer the most attractive upfront rate, with an average of 4.19%, down from 4.5% last week.

Those rates don’t include fees and other costs associated with obtaining home loans.

Where The Housing Market Is Headed

Interest rates rose dramatically during the spring, causing buyers to retreat slightly from a housing market that was already hitting record-high prices. As people were pulling back from purchasing homes, the housing market suddenly stalled, and some sellers are now lowering their home prices.

David Hall, president of Hall Financial Group, says that rising rates have slowed competition and lifted inventory, curbing the once-runaway seller’s market.

“For the first time in years, we are starting to see sellers lowering prices slightly due to less competition,” Hall says. “Less competition means better chances at having an offer accepted for serious and committed buyers.”

Inventory jumped 29% for the week ending on June 30 compared to a year ago, a shift in tides for home shoppers who have faced low supply during the Covid-era buying frenzy. But even with recent supply gains, inventory still needs to improve to meet demand, said Danielle Hale, chief economist at, in a recent report. The June levels, while up from last year, are still less than half the levels seen in June 2019.

“Put another way, today’s shoppers have more options, but the market needs even more before the selection is on par with the pre-pandemic or even early-pandemic housing market,” said Hale in the report.

Home Price Growth Is Falling At Record Pace

Home price growth is also beginning to decelerate at the largest one-month drop in 16 years. According to the latest report by Black Knight, a data analytics firm, the annual home price growth rate of 19.3% in May compared to 20.4% in April was the biggest single-month decline since 2006.

Price drops occurred in 97 of the largest 100 metro areas, signaling a nationwide market cooling. But even with these recent retreats, home prices would have to continue slowing at this rate for at least the next 12 months to return the housing market to a more normalized 3% to 5% growth rate, according to Ben Graboske, president of Black Knight Data & Analytics.

“That said, the pace of deceleration could very well increase in the coming months, as we’ve already begun to see in select markets such as Austin, Boise and Phoenix,” Graboske said in a statement.

Related: 10 Cheap Cities To Buy A Home

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