Washington
CNN
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The standard interest rate on a 30-year fixed-rate mortgage averaged 6.49 percent this week, slightly higher than the previous week, Freddie Mac reported Thursday. But that’s still well below this year’s peak and the two-decade high hit last fall — and that seems to be enough to prompt homeowners to refinance.
Mortgage applications rose 17 percent last week, largely as homeowners sought to refinance their mortgages. The increase was a staggering 35 percent, the Mortgage Bankers Association reported Wednesday. Mortgage rates fell to their lowest level in more than a year last week, according to figures from mortgage finance giant Freddie Mac.
And borrowing costs are likely to fall even further later in the year if the US Federal Reserve implements the interest rate cuts widely expected by economists and investors.
Despite falling mortgage rates, housing prices in America remain unaffordable for many Americans. This is especially true for low-income earners in metropolitan areas with rapidly rising housing prices, such as San Diego and New York.
According to data from S&P Global and the National Association of Realtors, real estate prices have reached record highs several times this year.
A persistent shortage of available housing units in many markets across the country continues to drive up home prices. There have been some big steps toward a more affordable market this year, with total housing unit inventory improving every single month so far through 2024, NAR data shows. But demand still exceeds supply.
A key factor that has driven down housing costs in places like Tampa, Denver and Minneapolis is the revival of home construction. The pace of home construction depends on factors such as local zoning regulations, land availability and population growth trends. In Tampa, an influx of new residents and many acres of developable land have helped housing cost increases to slow dramatically, pulling inflation down significantly throughout the metro area.
Persistently high housing costs are proving to be an obstacle to the Federal Reserve’s historic, ongoing fight against inflation. Inflation has fallen sharply from 40-year highs reached in the summer of 2022, reaching an annual rate of 2.9% in July, bringing the consumer price index below 3% for the first time in more than three years, according to data released Wednesday. But the Fed’s stated target is 2% year-over-year. Housing costs accounted for nearly 90% of last month’s increase in consumer prices.
Excluding housing costs, the consumer price index (CPI) rose by 1.7 percent in the twelve months to July, the Labor Department said.
This story is evolving and will be updated.
