Homebuyers get relief as rates fall, but a rebound looms

Mortgage rates declined this past week, for the third consecutive period, but those could turn around shortly based on recent movements in the benchmark 10-year yield.

The 30-year fixed rate mortgage averaged 6.6% as of December 12, the Freddie Mac Primary Mortgage Market survey found. That was down from last week when it was 6.69% and a year ago at 6.95%.

Meanwhile, the 15-year FRM was 5.84%, versus 5.96% on Dec. 5. For this same week in 2023, it averaged 6.38%.

"The combination of mortgage rate declines, firm consumer income growth and a bullish stock market have increased homebuyer demand in recent weeks," said Sam Khater, Freddie Mac chief economist, in a press release. "While the outlook for the housing market is improving, the improvement is limited given that homebuyers continue to face stiff affordability headwinds."

However, the 10-year Treasury yield has been on the rise since last week, even before the release of the Consumer Price Index inflation data that has many observers locking in their views on a 25 basis point rate cut by the Federal Open Market Committee.

On Dec. 9, the 10-year closed at 4.15%. As of 11 a.m. on Dec. 12, the yield was at 4.29%, the highest point in two weeks.

Some other indicators show rates rose this past week. Zillow's rate tracker was at 6.31% on Thursday morning, up 3 basis points from Wednesday and 4 basis points from the previous week's average.

Lender Price data on the National Mortgage News website was at 6.881%, up from 6.864% one week prior.

But Optimal Blue had the conforming 30-year FRM averaging 6.604% on Wednesday, down from 6.673% seven days prior.

Yesterday, the Mortgage Bankers Association Weekly Application Survey reported the average contract rate for 30-year fixed-rate mortgages fell two basis points to 6.67%.

"Homeowners are acting on the recent downtick in mortgage rates by refinancing, and prospective buyers have been more active," said Bob Broeksmit, president and CEO of the MBA in a Thursday morning statement. 'Purchase applications have increased on an annual basis every week except for one over the past three months, a positive sign for the mortgage market to close out this year."

The decline in mortgage rates hasn't pushed home purchase demand "to new heights," but to a "post-election normal" in terms of activity, said Chen Zhao, Redfin's economic research lead in a press release.

"In the months leading up to the election, house hunters were hibernating; demand was slower than we would have expected, even with high mortgage rates," Zhao said. "Now, early stage demand has jumped up to where we'd expect it to be."