The 30-year mortgage rate fell to 6.94%. (iStock)
Mortgage rates dipped below 7% again this week, with the average for a 30-year fixed-rate mortgage being 6.94%. Freddie Mac isThe average interest rate on a 30-year mortgage last week was 7.02%.
Fixed rates on 15-year mortgages also fell, averaging 6.24 percent. That’s only a slight decrease from last week, when 15-year mortgage rates averaged 6.28 percent. Lower interest rates and rising home inventory are positive signs for a housing market that has been plagued by soaring home prices in recent years.
“Spring homebuyers got a windfall this week as mortgage rates fell below the 7% mark for the first time in a month,” said Sam Carter, chief economist at Freddie Mac. “Existing home sales data this week showed a decline, but total inventory of both new and existing homes increased.”
“Increasing supply and the recent trend of lower interest rates bode well for the housing market,” Carter said.
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Gen Z and Millennials make up the majority of home buyers
Home buyers in 2023 were primarily made up of Gen Z and millennials. Nearly two-fifths of new mortgages were provided to buyers under the age of 35, and 26.5% of mortgages were provided to buyers between the ages of 35 and 44. Redfin Found In a recent report.
Historically, first-time homebuyers have made up a large portion of the existing buying market, so it’s not inherently surprising that two of the younger generations are making up a large portion of the market.
“First-time homebuyers aren’t as intimidated by high interest rates as those looking to move up to a bigger or nicer home,” says Antonia Ketabchi, an agent with Redfin Premier in Maryland. “Higher costs are still a challenge, but younger people are excited about the fact that they’re looking to buy their first home, and because they’ve been renters up until now, they’re not locked into lower mortgage rates.”
“Plus, they weren’t in the market three years ago when mortgage rates were below 3 percent, so they don’t have extremely low interest rates to compare it to,” Ketabchi said.
Buyers ages 45 to 54 accounted for 16.1% of new mortgages in 2023, while buyers ages 55 to 64 accounted for 10.8%. Because older people buy homes less frequently than other generations, buyers ages 65 to 74 accounted for just 5.4% of new mortgages.
Gen Z and Millennials may make up a large percentage of homebuyers, but these two generations still have the lowest homeownership rates. Younger generations have less time to enter the homebuying market, plus price is a big barrier with home prices at an all-time high. About 26% of Gen Zers will own their home as of 2023, compared to 55% of Millennials.
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Renting is slightly cheaper than buying, and Gen Z is renting more often than buying.
It’s becoming increasingly difficult for low-income earners to buy a home
Interest rates and home prices are keeping low-income homebuyers out of the market: Nearly one in five new mortgages (20.6%) went to households classified as low-income. Another Redfin report found.
At the height of the pandemic in 2020, low-income homebuyers accounted for 23.2% of new mortgage loans, indicating that their purchasing power has declined significantly over the past few years.
“2020 was a great time for low-income Americans to enter the housing market because mortgage rates were extremely low and home prices had not yet skyrocketed,” explained Elijah de la Campa, senior economist at Redfin.
“But ironically, the strong economy has made home buying more difficult, widening the real estate gap between the rich and poor,” Kampa said. “The Federal Reserve’s interest rate hikes, aimed at tamping down inflation and slowing an overheating economy, have pushed mortgage rates to near their highest levels in more than two decades. Additionally, home prices, which soared during the pandemic-induced home-buying boom and have remained high due to a shortage of homes for sale, are also inflating.”
There are still pockets of the country where low-income buyers can afford to buy a home. Some cities in the Midwest and East Coast have high rates of low-income buyers. Minneapolis had the highest percentage of low-income buyers among the 50 most populous cities, at 32.1%, according to Redfin. Detroit also had a high percentage, at 30.8%, according to Redfin.
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Currently, 550 cities in the United States have an average home price of over $1 million.
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