In the past few weeks, borrowing costs have seen a decline, yet some potential home buyers remain cautious, awaiting further reductions. The 30-year fixed-rate mortgage averaged 7.03% this week, a notable decrease from the recent highs, but mortgage applications for home purchases have seen minimal movement, standing 17% lower than a year ago, as reported by the Mortgage Bankers Association.

Freddie Mac’s Chief Economist, Sam Khater, notes that despite the initial rebound in purchase applications when rates dropped rapidly, the recent week showed a diminishing improvement in demand. Khater emphasizes that while the lower rates are a welcome relief, a more consistent drop is necessary to truly reinvigorate demand in the housing market.

A mere six weeks ago, mortgage rates were nearing 8%, reaching 20-year highs. However, recent weeks have witnessed a decline, resulting in approximately $166 in monthly savings on a $400,000 home at today’s average rates, according to Jessica Lautz, Deputy Chief Economist at the National Association of REALTORS®.

Lautz suggests that this reduction in rates could attract buyers who were previously priced out of the market. For those cautious about the autumn rise in mortgage rates, the current market trend may provide a more favorable outlook, offering optimism as we approach 2024.

Despite the positive shift in borrowing costs, aspiring homeowners still face challenges in finding available properties for purchase. The limited inventory in the for-sale market continues to be a hurdle, potentially impacting housing demand. Additionally, even in a slower housing market, buyers are still encountering multiple offer situations and competition from other buyers.

As of the week ending December 7, Freddie Mac reports the following national averages:

• 30-year fixed-rate mortgages: Averaged 7.03%, down from last week’s 7.22%. Last year at this time, 30-year rates averaged 6.33%.
• 15-year fixed-rate mortgages: Averaged 6.29%, a decrease from last week’s 6.56%. A year ago, 15-year rates averaged 5.67%.