Real Estate News

Buyer uncertainty holds sway as mortgage rates hold steady

Published: 07 Aug 2017

It might come as a surprise to many would-be buyers currently sitting on the sidelines of today's housing market, but the savings opportunities available to them now are probably among the best they can expect to encounter for some time to come. However, it is perhaps also understandable why any potential shopper might be a little hesitant to get into the market given the conditions they've faced in recent months.

In the short-term, rates seem to be in something of a holding pattern, but are up appreciably on a year-over-year basis, so that can create some misconceptions about what actually constitutes affordability. For instance, the latest data from Freddie Mac's Primary Mortgage Market Survey shows that in the week ending August 3, rates were little changed on both 15- and 30-year fixed-rate mortgages from the previous seven-day period, but up appreciably from where they were at the same time last year. In both cases, the year-over-year increase came to about half a full percentage point.

Moreover, it seems as though the current pattern of relatively small changes could last for some time to come. Sean Becketti, the chief economist for Freddie Mac, noted that it seems rates could remain somewhat flat for a little while to come despite some positive economic indicators, as investors are "erring on the side of caution."

Mortgage costs remain relatively affordable, but buyers are unsure how to proceed.Mortgage costs remain relatively affordable, but buyers are unsure how to proceed.

Buyers on the sidelines
When rates are generally on the rise so much year-over-year, it should come as no surprise that the number of current owners looking to refinance declines, but when they're in a holding pattern - and still well below all-time averages - the fact that buyers aren't as active may be puzzling. The total number of mortgage applications filed across the U.S. in the week ending July 28 slid 2.8 percent, on a 4 percent drop in refinancing and a surprising 2 percent drop in purchase activity, according to the latest Weekly Mortgage Applications Survey from the Mortgage Bankers Association.

That purchase rate brought the most recent activity level to the lowest point seen since March, but was still up 9 percent on an annual basis, showing just how strong the market for homes has become despite some lingering issues.

Rates still in good shape
Again, it's worth noting that in comparison with pre-recession and historical norms, mortgage rates remain eminently affordable, and that's also the case now in comparison with where they were in June, according to Bankrate. That may provide some encouragement to hopeful buyers, even as home prices continue to grow and are expected to stay on the rise for some time to come.

In fact, both rates and prices are expected to continue climbing throughout the remainder of the year - and potentially beyond. With this in mind, the earlier would-be buyers can get into the market, the better off they're going to be when it comes to locking in the best deal available to them.