E Economics

US 30-Year Mortgage Rate Retraced To 3%

16 April, 2021
30-year mortgage rate

US 30-year mortgage rate fell for the second straight week and reached a 6-week low. According to Freddie Mac, the 30-year fixed-rate mortgage (FRM) averaged 3.04 percent for the week ending April 15, 2021. It was down from the previous week when it averaged 3.08 percent. A year ago at this time, the 30-year FRM averaged 3.31 percent.

Over the same period, the report showed the 15-year fixed-rate mortgage dropped for the second straight week and also hit a 6-week low. It averaged 2.35 percent (down from 2.42 percent last week). A year ago at this time, the 15-year FRM averaged 2.80 percent.

The recent decline in mortgage rates followed a drop in treasury yields. The latter can be partly explained by the concerns related to the roll-out of Covid-19 vaccines in the US. This week, regulators urged a pause on administering the new jab produced by Johnson & Johnson.

However, most of housing experts think this move is transitory. As an exemple, Danielle Hale, chief economist at Realtor.com said “The break could be temporary with the upward trend resuming as the outlook for the economy brightens“. Sam Khater, Freddie Mac’s Chief Economist, also noted “Despite the pause in mortgage rates recently, we expect them to increase modestly for the remainder of this year.” Freddie Mac’s forecast, updated on Wednesday, foresees mortgage rates averaging 3.2 percent in the second quarter of 2021; 3.3 percent in the third quarter; and 3.4 percent in the fourth quarter. It added mortgage rates will climb into 2022, averaging 3.7 percent for the year.

Higher mortgage rates could dampen the robust demand seen over the past few months. In addition, a boom of home prices could add more pressure on affordability. As an example, the FHFA purchase-only price index rose 12.0 percent YoY in January. It was the largest increase on record. In this context, latest MBA data showed mortgage purchase applications fell for the third straight week.

U.S. housing prices (FHFA)

Housing prices are expected to keep rising sharply in the coming months due to tight inventory. The WSJ reported “The U.S. housing market is 3.8 million single-family homes short of what is needed to meet the country’s demand, according to a new analysis by mortgage-finance company Freddie Mac. The estimate represents a 52% rise in the nation’s home shortage compared with 2018.