Average mortgage rate drops below 7% for first time in a month
When mortgage rates fall, homebuyers can qualify to purchase properties at higher prices even as their income remains the same. Credit: Getty Images/Brandon Bell
The average 30-year fixed mortgage rate fell to 6.94%, dropping below 7% for the first time since early April, according to Freddie Mac's weekly report on mortgage rates.
The average has fallen for three straight weeks since reaching a high for this year at 7.22% on May 2. A year ago, the average was 6.57%.
When rates fall, Long Island homebuyers can qualify to purchase properties at higher prices even if their income remains the same. Mortgage rates were expected to fall this year if inflation slowed, but a series of economic reports over the past few months showing consumer prices still rising faster than expected has kept rates higher.
Nationally, existing home sales fell 1.9% in April compared with the previous year, but more properties have started to hit the market.
“Spring homebuyers received an unexpected windfall this week, as mortgage rates fell below the 7% threshold for the first time in over a month,” Sam Khater, chief economist at Freddie Mac, said in a statement. "Greater supply coupled with the recent downward trend in rates is an encouraging sign for the housing market.”
On Long Island, buyers are still challenged by a shortage of homes for sale. There were 4,132 single-family homes on the market at the end of April, which was down 10% from the same month a year ago. There are less than half as many residential properties for sale on Long Island as there were five years ago in April 2019, according to OneKey MLS data.
Sellers are hesitant to list their homes because they’re unwilling to exchange a loan at 3% or 4% for the rates of today, which is contributing to low inventory, said Gail Carillo, an associate broker at Coldwell Banker American Homes in Ronkonkoma. But higher rates haven’t scared off buyers.
“The increase in rates is not stopping the bidding wars on these properties,” Carillo said. “Normally, if the rates come up so high we would see some of the prices come down, but that’s not happening.”
A limited number of homes for sale has hurt new mortgage activity, said Casey Mauldin, chief revenue officer and chief lending officer at Westbury-based Jovia Financial Credit Union.
“High rates and limited inventory levels have made it very, very difficult,” Mauldin said.
Long Island has also seen home prices rise to record levels. The median price of a single-family home in Nassau County rose 12.7% to $765,000 last month, while the median in Suffolk rose 10% to $625,000, according to OneKey MLS.
As prices rise, borrowers typically look for the loan with the lowest rate, which is often adjustable-rate mortgages, Mauldin said. But borrowers have stayed away from those products.
That's because, he speculated, they are less certain they will be able to move to a new home or refinance at a lower rate when the introductory fixed-rate period of those loans end. As a result, 30-year fixed mortgages are more popular.
“People are looking for assurances,” Mauldin said.
At the end of 2023, local real estate experts had projected the Federal Reserve might cut its benchmark interest rate multiple times in the spring as inflation eased. But U.S. consumer prices rose 3.4% in April compared with a year earlier, which is well above the Fed's 2% target.
The Fed has maintained its benchmark rate at its highest level in two decades, and homebuyers are left to wonder if rates will drop more significantly in the future. Mortgage rates tend to rise during inflationary periods and fall when there is greater fear of recession.
“It's a wait-and-see game,” Mauldin said.
The average 30-year fixed mortgage rate fell to 6.94%, dropping below 7% for the first time since early April, according to Freddie Mac's weekly report on mortgage rates.
The average has fallen for three straight weeks since reaching a high for this year at 7.22% on May 2. A year ago, the average was 6.57%.
When rates fall, Long Island homebuyers can qualify to purchase properties at higher prices even if their income remains the same. Mortgage rates were expected to fall this year if inflation slowed, but a series of economic reports over the past few months showing consumer prices still rising faster than expected has kept rates higher.
Nationally, existing home sales fell 1.9% in April compared with the previous year, but more properties have started to hit the market.
“Spring homebuyers received an unexpected windfall this week, as mortgage rates fell below the 7% threshold for the first time in over a month,” Sam Khater, chief economist at Freddie Mac, said in a statement. "Greater supply coupled with the recent downward trend in rates is an encouraging sign for the housing market.”
On Long Island, buyers are still challenged by a shortage of homes for sale. There were 4,132 single-family homes on the market at the end of April, which was down 10% from the same month a year ago. There are less than half as many residential properties for sale on Long Island as there were five years ago in April 2019, according to OneKey MLS data.
Sellers are hesitant to list their homes because they’re unwilling to exchange a loan at 3% or 4% for the rates of today, which is contributing to low inventory, said Gail Carillo, an associate broker at Coldwell Banker American Homes in Ronkonkoma. But higher rates haven’t scared off buyers.
“The increase in rates is not stopping the bidding wars on these properties,” Carillo said. “Normally, if the rates come up so high we would see some of the prices come down, but that’s not happening.”
A limited number of homes for sale has hurt new mortgage activity, said Casey Mauldin, chief revenue officer and chief lending officer at Westbury-based Jovia Financial Credit Union.
“High rates and limited inventory levels have made it very, very difficult,” Mauldin said.
Long Island has also seen home prices rise to record levels. The median price of a single-family home in Nassau County rose 12.7% to $765,000 last month, while the median in Suffolk rose 10% to $625,000, according to OneKey MLS.
As prices rise, borrowers typically look for the loan with the lowest rate, which is often adjustable-rate mortgages, Mauldin said. But borrowers have stayed away from those products.
That's because, he speculated, they are less certain they will be able to move to a new home or refinance at a lower rate when the introductory fixed-rate period of those loans end. As a result, 30-year fixed mortgages are more popular.
“People are looking for assurances,” Mauldin said.
At the end of 2023, local real estate experts had projected the Federal Reserve might cut its benchmark interest rate multiple times in the spring as inflation eased. But U.S. consumer prices rose 3.4% in April compared with a year earlier, which is well above the Fed's 2% target.
The Fed has maintained its benchmark rate at its highest level in two decades, and homebuyers are left to wonder if rates will drop more significantly in the future. Mortgage rates tend to rise during inflationary periods and fall when there is greater fear of recession.
“It's a wait-and-see game,” Mauldin said.
Jonathan LaMantia covers residential real estate and other business news on Long Island. He previously covered the business of health care for Crain's New York Business.
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