Mortgage Rates Fall to Lowest Level in Almost Three Months, Pressure Off America's Unaffordable Housing Market

Strategic Insights -

Mortgage rates have seen a consecutive three-week decline, resulting in a 6.87% average for 30-year fixed-rate mortgages as of June 20. This marks the third straight week of decrease, a response to signs of cooling inflation and market expectations of a future Federal Reserve rate cut. The US housing market remains hampered by elevated interest rates, causing issues such as a decline in new home construction and a fall in sentiment among homebuilders. The persistently high mortgage rates, combined with higher rates for construction and development loans, chronic labor shortages, and a lack of buildable lots, are discouraging potential buyers. The housing inventory, although improved in recent months, remains far below demand, contributing to the affordability crisis.

Key Takeaways:

  • The 30-year fixed-rate mortgage averaged 6.87% in the week ending June 20, down from 6.95% the previous week and marking the third consecutive weekly decline.
  • Mortgage rates are down from their 2024 peak of 7.22%, indicating a slight decrease in borrowing costs for potential homebuyers.
  • New home construction was significantly weaker than expected in May, averaging 1.28 million units, the lowest level since 2020, and down 5.5% from April.
  • Building permits came in below economists' expectations, suggesting a potential slow-down in new construction projects.
  • The National Association of Home Builders/Wells Fargo Housing Market Index reported a decrease in sentiment among homebuilders in May to its lowest level since December.
  • Persistently high mortgage rates, higher rates for construction and development loans, chronic labor shortages, and a lack of buildable lots are discouraging potential buyers.
  • The median-income household would need to save up more than $127,000 for a down payment to afford a monthly mortgage payment on the typical US home, according to Zillow analysis.
  • Home prices remain sky-high, with the S&P CoreLogic Case-Shiller US National Home Price Index rising 6.5% in March from a year earlier to a record high.

Statistics:

  • The 30-year fixed-rate mortgage average is 6.87% as of June 20.
  • Mortgage rates have fallen 0.08% from the previous week and 0.35% from the 2024 peak.
  • New home construction averaged 1.28 million units in May, the lowest level since 2020.
  • The S&P CoreLogic Case-Shiller US National Home Price Index rose 6.5% in March from a year earlier to a record high.
  • A median-income household would need to save up more than $127,000 for a down payment to afford a monthly mortgage payment on the typical US home.

Sources:

  • Mortgage Bankers Association (MBA)
  • National Association of Home Builders/Wells Fargo Housing Market Index
  • S&P CoreLogic Case-Shiller US National Home Price Index
  • Zillow analysis