This week's mortgage rates are down one further, to their lowest point since May.

The 30-year fixed mortgage rate dropped from 6.67% to 6.61% the previous week, based on information that Freddie Mac issued on Thursday. Rates decreased for the seventh week in a row. Rates have decreased overall by more than one percentage point from 7.79% in October.

(Photo : by PATRICK T. FALLON/AFP via Getty Images)
This week's mortgage rates are down one further, to their lowest point since May.

The current improvement should theoretically alleviate concerns for prospective homeowners. But cost remains a concern due to the small number of existing homes available on the market.

Economists' expectations for mortgage rates improved after the Fed indicated intentions to reduce rates up to three times in 2024. The National Association of Realtors (NAR) predicted that rates will average 6.3% in 2024, however Realtor.com economists predicted that rates will average 6.8% for most of the year before falling to 6.5% at the end of the year.

Although, as is customary throughout the holiday season, homebuyers have been sluggish to react to the recent reduction in rates, that may soon change in the new year.

According to Gumbinger, if interest rates persist at their current low levels until the middle of the next month, there is a high probability of observing a substantial response from potential homebuyers. This anticipation underscores the sensitivity of the housing market to the dynamics of interest rates.

If a homeowner believes they can earn a favorable interest rate, they could even be persuaded to sell. However, most people appear content with their present rates.

Roughly two thirds of active mortgages have rates under 4%, and over 90% have rates under 6%, according to Realtor.com. However, compared to the previous year, there were 7.5% more newly listed residences on the market in November, suggesting that sellers are taking greater initiative.

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Bidding Wars?

There have been some faint indications of life in the market, even if the recent drops in mortgage rates haven't resulted in an increase in house sales.

For the first time in five months, existing home sales increased in November. Lawrence Yun, the chief economist at NAR, noted that further activity in the resale market may be anticipated if rates continue to drop.

According to the MBA, the number of refinancing applications increased by as much as 19% during the week that ended on December 8. November had a 21.8% rise in new home sales over the previous year, which was the opposite of October's 12% decline in applications due to high rates.

Still, certain economic indicators won't be able to pick up on the change in the market for at least a few months. For example, it takes one to two months for contract signings or pending house purchases to get officially recorded as fulfilled transactions.

Although there has been some improvement in the supply of previously owned houses, prices are still rising since these properties remain close to all-time lows. For example, the National Association of Realtors (NAR) reports that the median sales price of a previously owned house increased by 4% year over year to $387,600 in November, the fifth consecutive month of rises.

Additionally, last month's inventory of unsold existing houses decreased by 1.7% to 1.13 million units at the end of November, or 3.5 months' supply. For a balanced market, housing experts advocate a minimum of six months' supply.

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