Mortgage rates continue to fluctuate, impacting homebuyer demand

Mortgage rates in the US have dropped for the second consecutive week, with the average rate on a 30-year mortgage falling to 7.5%, the largest one-week decline since November 2022. While this presents an opportunity for homebuyers, it also poses challenges as increased demand may further drive up home prices in a limited-supply market. Many buyers have been waiting for rates to drop before entering the market, and the recent decline has led to a 3% increase in mortgage applications for home purchases. However, the purchase application index remains 20% lower than last year, reflecting the worsening affordability due to elevated mortgage rates. Additionally, the shortage of housing inventory remains a problem, as many homeowners are reluctant to sell due to their historically low mortgage rates.