The average U.S. mortgage rate for a 30-year fixed loan is 2.87% this week, dropping one basis point from last week’s 2.88%, Freddie Mac said in a report on Thursday. The rate is now one basis point from an all-time low set in mid-September.
The average fixed rate for a 15-year mortgage was 2.37%, rising one basis point from last week’s 2.36%, the mortgage securitizer said.
Mortgage rates that have stayed below 3% for 11 consecutive weeks have boosted housing demand, acting as a counter-weight for an economy that is struggling amid the worst public health crisis in more than a century.
“With near-record-low rates, buyer demand remains robust with strong first-time buyers coming into the market,” said Sam Khater, Freddie Mac’s chief economist. “The demand is particularly strong in more affordable regions of the country such as the Midwest, where home prices are accelerating at the highest rates over the last two decades.”
Sales of existing homes rose to a 14-year high of six million at an annualized pace in August, the National Association of Realtors said in a report last month.
Combined sales of single-family houses, townhomes, condominiums and cooperatively owned apartments rose 2.4% from July, according to the report. Compared to a year ago, prior to the COVID-19 pandemic, August’s sales were 11% higher, NAR said.
“The buyers are coming in because of the low interest rates – that’s the number 1 reason,” said Lawrence Yun, NAR’s chief economist.
The low rates are also putting upward pressure on home prices, because cheaper financing typically means borrowers qualify for bigger mortgages and can bid higher for properties they want. The median existing-home price in August was $310,600, up 11.4%, and prices rose in every region, NAR said.
The boost in demand that comes from the low rates have worsened an inventory shortage that plagued the market long before the pandemic hit the U.S.
The number of homes on the market at the end of August totaled 1.49 million, down 18.6% year-over-year, the NAR report said.
Unsold inventory measured as a “months supply” number that gauges how long it would take to sell all the homes if nothing else came on the market, was three months, NAR said. That’s down from 3.1 months in July and compared with four months a year ago.