Interest rates fall for the sixth week in a row

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Mortgage rates fell for a sixth straight week, but housing activity remained subdued into the holiday season.

The rate on the average 30-year fixed mortgage fell to 6.27% from 6.31% the week before, according to the . Rates have fallen by more than three-quarters of a point since mid-November after the Federal Reserve signaled it would slow its rate hikes amid cooling inflation.

Still, fees remain 3 percentage points higher than at the start of the year, leaving many first-time buyers on the sidelines and sellers — who haven’t pulled their listings — more willing to negotiate.

“Going into the holiday season, mortgage rates have continued to decline,” Sam Khater, chief economist at Freddie Mac, said in a press release. “Rates have dropped significantly over the past six weeks, which is helpful for potential homebuyers, but new data indicates homeowners are hesitant to list their homes. Many of these homeowners are carefully weighing their options, as more than two-thirds of current homeowners have a fixed mortgage rate below 4%.”

Housing affordability remains a challenge

Mortgage demand improved slightly from the previous week, according to the Mortgage Bankers Association for the week ended Dec. 16, but buying activity was down 3% compared to the prior week. Overall, purchase orders were down 36% year-on-year, the MBA noted, as most price-affected buyers opted to wait longer.

“A slowdown in buyer activity is typical for this time of year,” Scott Sheldon, branch manager at New American Funding, told Yahoo Money, adding that buyers prefer to wait until the end of the holidays to return to their buying plans.

Still, the housing downturn began long before the holiday season began, as many homebuyers were spooked by higher mortgage payments and interest rates, with “first-time homebuyers hardest hit,” Sheldon said.

According to , the national average mortgage payment was $1,977 in November. Even though it’s down from $2,012 in October, the average payout is still 42.9% higher — or $594 more per month — than it was at the start of the year.

“As a buyer, seeing rates increase from an average of 3% to a loan of 6.50% is a tall order,” said Sheldon. “This is what people are facing right now and the only way to make up for it is to negotiate a purchase price.”

Sellers cut listing prices

Blaine, Minn., advertises new single-story homes for sale starting at $450,000. (Photo by: Michael Siluk/UCG/Universal Images Group via Getty Images)

Many sellers who don’t want to trade or lose their existing low mortgage rate are giving up on selling altogether.

A record 2% of homes for sale were pulled off the market each week on average during the 12 weeks to Nov. 20, Redfin data showed, compared with 1.6% a year earlier. The share of delistings increased to 1.9% in the 12 weeks ended Nov. 27.

Sellers who remain in the market, however, are slashing prices more frequently.

The share of homes with price reductions increased in November from 9.2% a year earlier, according to Realtor.com. About 37% of builders reduced their prices last month, against 26% in September, according to , with an average price cut of 6%.

Overall, the national average list price dropped to $416,000 in November, according to , down from $425,000 in October and June’s record high of $449,000.

According to Mike Fratantoni, MBA’s chief economist and senior vice president of industrial research and technology, it will take some time for home prices to normalize again.

“House prices are expected to remain stable at the national level and this trend will continue through 2024,” Fratantoni told Yahoo Money. “House prices won’t run away from buyers like they have in the last couple of years and rates will come down – but it will be a weaker economy so that will be a challenge for some buyers.”

Gabriella is a personal finance reporter for Yahoo Money. Follow her on Twitter @__gabriellacruz🇧🇷

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