(Bloomberg) — Mortgage rates in the US fell slightly, adding support to a housing market where demand has been improving.
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The average for a 30-year, fixed loan was 6.63%, down from 6.69% last week, Freddie Mac said in a statement Thursday.
While the decline puts borrowing costs back on a downward path, significant relief for homebuyers may be a ways off. The Federal Reserve has been in a holding pattern on interest rates since July. While policymakers on Wednesday signaled they’re open to cuts this year, Fed Chair Jerome Powell said more data is needed before they can begin.
“Any premature rate cut could pose a dangerous risk of inflation rebounding,” said Jiayi Xu, an economist at Realtor.com. “In other words, the persistently high rate environment will continue to affect all parts of the economy.”
Mortgage rates that are down more than a percentage point from recent highs have perked up the housing market, spurring gains in December for both new-home sales and contracts to buy previously owned properties.
“The economy continues to outperform due to solid job and income growth, while household formation is increasing at rates above pre-pandemic levels,” Sam Khater, Freddie Mac’s chief economist, said in the statement. “These favorable factors should provide strong fundamental support to the market in the months ahead.”
Affordability remains a hurdle as a shortage of listings keeps prices elevated. While inventory is increasing, it’s likely to remain tight until a more substantial decline in mortgage rates draws more sellers to the market. Many current homeowners are hanging onto sub-4% mortgages, reluctant to move and take on more expensive loans.
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