Mortgage Rates Decline For Fifth Week In A Row: 'Encouraging Development For Potential Homebuyers'

BY Benzinga | AGENCY | 11/30/23 03:15 PM EST

Potential homebuyers found further relief on Thursday after mortgage rates fell in the U.S. for the fifth consecutive week.

The average rate for a 30-year loan fell to 7.22%, down from 7.29% last week, said Freddie Mac, the mortgage-backed securities broker.

Although conditions for buyers appear to be easing, 30-year mortgage rates remain close to their peaks. On Oct. 26, the average 30-year mortgage rose to a 23-year high of 7.79%, according to Freddie Mac data.

“The current trajectory of rates is an encouraging development for potential homebuyers, with purchase application activity recently rising to the same level as mid-September when rates were similar to today's levels,” said Sam Khater, chief economist at Freddie Mac.

Also Read: Homebuilder Stocks In 2024: Can The Sector Enjoy Another Stellar Year?

Home Sales Under Pressure

Added to the high cost of borrowing, house prices remain at record highs as the pace of new builds slows and sales of existing homes fell 4.1% last month, leaving limited supply to meet demand from potential buyers.

Also released on Thursday, and underlining the fragile balance between supply and demand, was data showing pending home sales fell to a fresh cycle low, 0.6% below the previous low.

“Home sales have been under significant pressure in recent months, but the ongoing fall in mortgage rates and bounce in purchase applications which began in late October suggests that a modest rebound in home sales lies ahead,” said Kieran Clancy, senior U.S. economist at Pantheon Macroeconomics.

Wednesday’s mortgage application data from the Mortgage Bankers Association showed an increase for the fourth consecutive week.

Ripe Conditions For Home Builders

Record-high house prices, easing mortgage affordability and buoyant demand have combined to provide near-perfect conditions for home builders, and shares have risen rapidly.

DR Horton (DHI) has gained 22% in the past month, and is up 42% this year, while Lennar Corporation (LEN) is up 20% on the month and 41% since the start of the year.

The SPDR Series Trust SPDR Homebuilders ETF , an exchange-traded fund that tracks homebuilder stocks on the S&P 500 index, has gained 37% since the start of the year.

“The lack of existing home supply this year has enabled homebuilders to capture market share,” Clancy said.

He added: “The key question for homebuilders as we move through 2024 will be the extent to which the relative boost to new home sales and single-family construction from lower mortgage rates is offset by an increase in existing home supply.”

Now Read: Existing Home Sales Fall In October As Inventory Remains Tight

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