Average U.S. interest rates for the 30-year, fixed-rate mortgage loan decreased for the third consecutive week for the week ending March 30, 2023, according to Freddie Mac's weekly Primary Mortgage Market Survey (PMMS).
The PMMS focuses on conventional, conforming, fully amortizing home purchase loans for borrowers who put 20 percent down and have excellent credit.
"Economic uncertainty continues to bring mortgage rates down," Freddie Mac's Chief Economist Sam Khater said. "Over the last several weeks, declining rates have brought borrowers back to the market, but, as the spring homebuying season gets underway, low inventory remains a key challenge for prospective buyers."
About six months of inventory is considered a balanced market between home sellers and buyers. At the end of February 2023, there was slightly less than one month of single-family inventory in Massachusetts and about five weeks of condominium inventory.
According to CoreLogic, several reasons exist for the historically low inventory environment, including older homeowners hanging on to their homes. Seniors are staying put because home prices in some areas are about 40 percent higher than before the pandemic, and interest rates are soaring. Also, seniors are healthier than ever, allowing them to stay in their homes longer.
Lower interest rates have spurred mortgage activity, but purchase applications remain significantly behind last year's pace, the Mortgage Bankers Association reported on March 29, 2023. "The seasonally adjusted Purchase Index increased 2 percent from one week earlier. The unadjusted Purchase Index increased 2 percent compared with the previous week and was 35 percent lower than the same week one year ago."
The pullback in interest rates is welcome news for homebuyers struggling with affordability. In February, single-family homes were less affordable than in January, according to the Massachusetts Association of Realtors Housing Affordability Index, which considers median household income, median home price, and interest rates.
A higher number means greater affordability. For example, an index of 110 means the median household income is 110 percent of what is needed to qualify for a median-priced home with current interest rates. The index fell to 60 for single-family homes in February after increasing month-to-month since September 2022. For condos, the index improved slightly to 68 compared to January's 65 but was down 22 percent from February 2022.