It appears that American homebuyers are finally getting some much-needed respite as mortgage rates continue to drop. As of Thursday, April 6th, the Federal Home Loan Mortgage Corporation (Freddie Mac) released a report showing how mortgage rates have been falling for four consecutive weeks.

As of last week, the 30-year fixed-rate mortgage bore an average of around 6.28%, four points lower than the 6.32% recorded in the previous week. This is also substantially lower than the 4.72% seen at this time last year.

While this seems advantageous given how the spring home-buying season has just kicked off in the United States, Freddie Mac chief economist Sam Khater warns that potential homebuyers will face numerous challenges, the most critical being the inventory of purchasable homes which, to date, remains on the low end.

In November last year, mortgage rates in the country hit a high of around 7.08%. As 2023 rolled in, rates began inching downward but spiked again in February in light of the possibility that the Federal Reserve would continue raising interest rates to combat inflation.

Indeed, the Fed recently hiked interest rates by a quarter-point during its latest policymaking session, not only to address inflation but to serve as a buffer against the recent catastrophes hitting the global banking sector.

What Does the Recent Slew of Banking Crises Mean for Homebuyers?

In recent weeks, global finance was shaken by the collapse of California’s Silicon Valley Bank as well as UBS’ takeover of troubled firm Credit Suisse. While neither of these issues has any direct bearing on the real estate sector, experts say that these could lead to stricter requirements on lending, along with a much colder borrowing environment. economic research analyst Hannah Jones made a statement on Thursday about how more expensive and stricter lending regulations could improve the state of the economy in the long run, but also lead to a more challenging borrowing process for big-ticket purchases, including new homes.

Jones added that investors sought high land in the bond market as a way to address instability in the banking sector. However, this consequently drove bond yields lower. But since uncertainty has begun to ease in the financial sector. investors have moved away from bonds, leading to a subsequent increase in bond yields.

Mortgages specifically move along with ten-year Treasury yields which moved higher last week, but the distance between these two factors has grown narrower over the past several weeks, thanks to the drop in mortgage rates.

Still, Jones believes that, while those seeking to buy a home will continue to deal with higher mortgage rates and home prices for now, home prices are showing signs of softening. Indeed, current rates may be seen as a go-signal for buyers who are bound to take advantage of lower rates and selling prices.