Low inventory a challenge to housing market as rates decline

Didier Malagies • April 5, 2023


Mortgage rates declined for the third consecutive week, sparking hope for a good homebuyers’ spring season. But while rates have dropped, the housing market has continued to be challenged by low inventory levels. 


Freddie Mac’s Primary Mortgage Market Survey showed on Thursday that the 30-year fixed-rate mortgage was 6.32% as of March 30, down 10 basis points from the previous week, mainly due to the economic uncertainty caused by bank collapses. The survey shows the same rate was 4.67% a year ago. 


“Over the last several weeks, declining rates have brought borrowers back to the market but, as the spring homebuying season gets underway, low inventory remains a key challenge for prospective buyers,” Sam Khater, Freddie Mac’s chief economist, said in a statement. 


Altos Research data shows that the weekly inventory fell from 414,278 on March 17 to 413,169 on March 24. 

“As the prime spring buying season takes off and the best time to sell draws near, buyers will be looking for well-priced, ready-to-move-in homes,” Hannah Jones, Realtor.com’s economic data analyst, said in a statement. “Spring sellers should start getting their home ready for sale, keeping in mind that it took longer than expected to prep.”   


Surging rates ahead? 


Despite the week-over-week decline, mortgage rates started to tick up again over the last few days. 

At HousingWire’s Mortgage Rates Center, the Optimal Blue data shows the 30-year conforming mortgage rate at 6.44% on Wednesday, down from 6.47% the prior Wednesday. However, the same rate was 15 basis points higher compared to last Friday.


At Mortgage News Daily, rates were at 6.61% on Thursday afternoon, up one basis point from the previous closing and 23 bps from 6.38% compared to Friday. 


According to mortgage rate observers, investors pushed the 10–year Treasury yield up over the last few days as they shifted away from bonds to other options because the uncertainty in the financial sector waned. Mortgage rates, directly correlated to the U.S. treasuries, increased in the period.


“The 10-year yield has been stuck in a range for 2023, and as the crisis slowed down in terms of headlines, the bond market channel stayed in line,” Logan Mohtashami, lead analyst at HousingWire, said. 

“The spreads between the 10-year yield and the 30-year mortgage have gotten stressed due to the crisis. So, even though mortgage rates fell last week, they quickly reversed as the 10-year yield bounced higher this week,” Mohtashami added. 


Regional banks that suffered a liquidity crisis due to a deposit run have received help through a sale or a cash infusion. First Citizens Bank acquired Silicon Valley Bank, and Flagstar Bank assumed most deposits and certain assets of Signature Bridge Bank. In addition, 11 U.S. banks made $30 billion in deposits at First Republic Bank. 

On Thursday, the yield for the 10-year Treasury was at 3.56%. Mohtashami’s forecast for 2023 is for the 10-year yield to remain between 3.21% and 4.25%, meaning mortgage rates should be between 5.75%- 7.25%, assuming the spreads were vast.




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