The average interest rate on a 30-year mortgage tumbled to a 50-year low on Thursday by dropping to 2.98%, which will increase homebuyer demand, according to Freddie Mac, a government-sponsored organization that provides liquidity to the housing market.
Mortgage rates have been at historic lows for years and have contributed to an active housing market even during the pandemic, according to real estate firms.
In June, the demand for buying a home was 25% above pre-pandemic levels, according to Redfin, a real estate brokerage firm. Bidding wars between more than one buyer were common, and asking prices jumped nearly 10% when compared to prices from January.
That momentum accelerated into July, according to Realtor.com, a real estate listings website. Homes sold six days faster in the week ending July 11 than they did in the week ending June 27.
Part of the reason home sales are moving faster is there are fewer homes for sale, so buyers must act quickly to outpace the competition.
When the pandemic hit the country, sellers retreated, either by taking their homes off the market or not listing them. The result is that total listings are down 32% when compared to last year for the week ending July 11, according to Realtor.com.
Meanwhile, the pandemic did not encourage a large number of buyers to leave the market. The result is that home prices have increased. The median listing price for homes increased nearly 8% from a year ago for the week ending July 11, according to Realtor.com.
Thursday’s drop in average mortgage interest rates will lead to “increased homebuyer demand,” according to Freddie Mac. It will also likely put upward pressure on pricing.
Freddie Mac began tracking mortgage interest rates in 1971, and the current rate is the lowest in its history.
The average on interest rates for 30-year mortgages has fluctuated greatly over the past 50 years, with rates as high as 17.61% on January 22, 1982, to today’s rate that is below 3%.
