The average 30-year fixed mortgage rate slipped to 6.67% this week, its first decline in six weeks, but remained above 6.58% a year earlier.
High borrowing costs and record prices pushed existing-home sales down 1.7% in July, while first-time buyers continued to lose ground.
Buyers are gaining negotiating power in some markets as listings and price reductions increase, but affordability remains the central obstacle.
Mortgage rates edge lower, but housing market remains stuck in an affordability squeeze
The average U.S. mortgage rate declined slightly this week, offering prospective homebuyers a measure of relief but little immediate escape from the affordability pressures weighing on the housing market.
The average rate on a 30-year fixed mortgage fell to 6.67% as of Aug. 13, down from 6.69% the previous week, according to Freddie Mac’s Primary Mortgage Market Survey. It was the first weekly decline in six weeks, although the rate remained higher than the 6.58% average recorded a year ago.
The average 15-year fixed rate also fell, to 5.96% from 6.01%. A year earlier, it averaged 5.71%.
Better than a year ago
Freddie Mac said housing affordability had improved from a year ago and noted that recent increases in purchase and refinancing applications showed borrowers responding to even modest changes in rates. Mortgage applications rose 3.6% in the first week of August, including a 3% increase in purchase applications and a 5% rise in refinancing demand, according to Mortgage Bankers Association data.
Still, the latest decline is too small to change the financial equation substantially for most households. A buyer borrowing $400,000 at 6.67% would face a monthly principal-and-interest payment of about $2,574. That excludes property taxes, insurance, homeowners association fees and other ownership expenses.
Rates also remain far above the exceptionally low levels available during the pandemic. Many current homeowners have mortgages below 4%, creating a “lock-in” effect that discourages them from selling and taking out a new, substantially more expensive loan.
Expensive combination
The combination of elevated rates and high prices is keeping the market unusually sluggish. Sales of previously occupied homes declined 1.7% in July to a seasonally adjusted annual rate of 4.06 million, according to the National Association of Realtors. Sales were nevertheless 0.7% higher than a year earlier.
The national median existing-home price rose 2% from a year ago to $434,100, setting a record for July. The market had 1.54 million unsold homes at the end of the month, equivalent to a 4.6-month supply at the current sales pace.
First-time buyers accounted for just 29% of July transactions, well below their historical share of roughly 40%. That group is especially sensitive to rates because its members generally have less home equity or sale proceeds to apply toward a down payment. The share of all-cash buyers and older homeowners in the market can further disadvantage younger, mortgage-dependent shoppers.
Sellers face more pressure
The result is a market that is loosening without becoming more affordable. Sellers are facing more pressure to adjust expectations, particularly in regions where supply has recovered, but prices have not fallen enough to offset financing costs.
The median U.S. listing price was $428,950 in July, down 2.4% from a year earlier, according toRealtor.com’s monthly housing report. Active listings increased 2.1%, while 20% of homes on the market had received a price cut. Inventory, however, was still 11.6% below typical 2017–2019 levels.
Conditions vary sharply by region. July listing prices were down 3.9% in the West and 2.5% in the South, while prices edged 0.2% higher in the Midwest. More than 30% of listings in Portland and Denver had price reductions, compared with fewer than 10% in Hartford and New York City.
That divergence means buyers in some Sun Belt and Western markets may have room to negotiate over price, repairs or closing costs. Buyers in parts of the Northeast and Midwest, where inventory remains comparatively tight, can still face competition for desirable properties.
The outlook depends heavily on inflation and the bond market. Mortgage rates do not move directly with the Federal Reserve’s benchmark rate; they tend to track the 10-year Treasury yield and investors’ expectations for inflation and economic growth. Recent easing in Treasury yields helped mortgage rates retreat this week.