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Mortgage rates dropped once more this week as the Fed opted to skip a hike to the federal funds rate - and more relief could be on the way.
"As inflation continues to decelerate, economic growth is slowing and the tightening cycle of monetary policy is reaching its apex, which means mortgage rates are expected to decrease later this year and into next," says Sam Khater, chief economist at housing giant Freddie Mac.
Even so, today's rates - considerably higher than they were a couple years ago - are keeping both buyers and sellers at bay.
Say you're buying a $500,000 home. Assuming you have a 10% down payment and lock in a 30-year fixed mortgage at today's average rate of 6.69%, you'd have to pay about $3,460 a month after property taxes and home insurance, according to estimates from Zillow.
Considering that most lenders want you to keep your housing expenses at or under 30% of your gross income, you'd need to earn at least $138,000 a year to afford that $500,000 home.
The average 30-year fixed rate fell to 6.69% this week, while last week it averaged 6.71%. A year ago at this time, the rate averaged 5.78%.
"Mortgage rates have been on the high end of the 6-7% range since the beginning of June, and home prices have made their typical seasonal ascent, though less aggressively than in summers past," writes Hannah Jones, economic research analyst at Realtor.com.
But Jones notes home prices aren't expected to hit a new peak this summer, as has been the case in previous years. The national median listing price fell year-over-year last week - for the first time since 2016.
"Despite this annual price decline, homes in many areas are out of the feasible price range for many buyers and still-high interest rates are discouraging homeowners from giving up their current mortgage rate and listing their homes for sale," Jones adds.
The average rate on a 15-year home loan, on the other hand, inched up from 6.07% to 6.10% this week. This time a year ago, the 15-year fixed-rate averaged just 4.81%.
Nadia Evangelou, senior economist at the National Association of Realtors (NAR), believes inflation "may ease even faster in the following months."
She notes the latest consumer price index release indicates rent growth has already peaked and is beginning to cool.
"With this decelerating trend in rent prices to persist in the upcoming months - following the trend of asking rent prices reported by the private sector - inflation will slow down further, pulling down mortgage rates."
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Putting a number to the ongoing housing crunch across the country, Redfin reports there are 39% fewer homes on the market now than there were five years ago, in June 2018.
The total number of homes for sale also plunged 6% from last year, during the four weeks ending June 11. That's the biggest drop in 13 months.
"The Fed's indication that there are more rate hikes to come is not what homebuyers want to hear. It's likely to keep mortgage rates elevated and may even push them up a bit," says Redfin economics research lead Chen Zhao.
"People who are sitting on the sidelines, waiting for mortgage rates to decline, should know that's unlikely to happen in the foreseeable future. If a home that's in your price range and has everything on your wishlist hits the market, there's no good reason to wait."
That said, sellers are reluctant to list their homes, especially those who seized record-low rates in the first couple years of the COVID-19 pandemic, further contributing to the shortage.
In fact, 98% of outstanding borrowers hold a below-market mortgage rate, according to a recent estimate from Goldman Sachs.
Demand for mortgages climbed 7.2% from last week, according to the Mortgage Bankers Association (MBA).
Refinance activity also increased by 6% - though it's still 41% lower than the same week a year ago.
"Rates that are still more than a percentage point higher than a year ago, and low for-sale inventory continue to constrain home buying activity in many markets," says Joel Kan, vice president and deputy chief economist at the MBA.
"The average loan size on a purchase loan decreased for the third straight week, as we continue to see more first-time homebuyer activity in the purchase market."
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