Mortgage rates fell again this week, but the primary cause was not the banking crisis fiasco. It was the expectation that the U.S. economy is slowing down.
According to Freddie Mac’s Primary Mortgage Market Survey, the 30-year fixed-rate mortgage declined to 6.28% as of April 4, down from 6.32% the previous week. The survey focuses on conventional and conforming loans for borrowers who put 20% down and have excellent credit.
Meanwhile, at HousingWire’s Mortgage Rates Center, Optimal Blue’s 30-year fixed conforming mortgage rate was trending even lower at 6.22% as of April 5, down compared to 6.44% the previous Wednesday. The rate is calculated using actual locked rates with consumers across 42% of all mortgage transactions nationwide.
Industry observers believe rates are trending down because of new data showing a weaker labor market.
Job openings decreased to 9.9 million in February, down 632,000 compared to January, the U.S. Bureau of Labor Statistics published Tuesday. New hires declined to 6.1 million in February from 6.3 million in January.
“Investors are preparing for Friday’s job report, anticipating signs of a slowing economy in light of February’s job openings and labor turnover report, which showed falling job openings,” Hannah Jones, Realtor.com’s economic data analyst, said in a statement.
“As markets prepared for news of a slowing economy, demand for bonds increased, resulting in lower yields. The 10-year treasury yield fell into the low 3.3% range mid-week, and mortgage rates also tracked lower,” Jones added. To illustrate, the 10-year Treasury yield was at 4% a month ago.
George Ratiu, the chief economist at Keeping Current Matters, said mortgage rates slid for the fourth consecutive week as investors reacted to weakening signals in factory orders and manufacturing, as well as the softer-than-expected job openings and private employment data.
“After spending the better part of 2022 fretting over a potential recession due to the Federal Reserve’s monetary tightening, investors have been on the lookout for any signs of a slowdown,” Ratiu said in a statement. “So far, economic indicators have shown resilience.”
Demand for home loans
Since September 2022, the 30-year mortgage rate has been moving in a narrow 6% – 7% range – despite breaching the 7% ceiling a couple of times, according to Ratiu.
“The trend has normalized the fact that interest rates are expected to remain elevated this year and served to smooth the psychological shock consumers experienced during last year’s surge,” Ratiu said. “Buyers seem to adjust to the new reality, as we saw by the signs of increased demand in last month’s home sales.”
Buyer demand tends to be sensitive to mortgage rate changes. However, affordability challenges remain. According to Ratiu, the buyer of a typical home is facing a $2,091 monthly payment, which is 26% higher than last year.
“Mortgage rates continue to trend down entering the traditional spring homebuying season,” Sam Khater, Freddie Mac’s chief economist, said in a statement. “Unfortunately, those in the market to buy are facing a number of challenges, not the least of which is the low inventory of homes for sale, especially for aspiring first-time homebuyers.”