Borrowing costs are lower even after the Fed’s hike this week—but a bigger issue looms large. While the outlook for borrowing costs bodes well for prospective home buyers this spring, the lack of inventory does not.

The number of homes on the market remains tight—still below pre-pandemic levels. Newly listed homes have plunged about 21% compared to a year ago, realtor.com® reported this week. “Spring is typically the busiest season for the residential housing market, and despite rates hovering in the mid-6% range, this year is no different,” says Sam Khater, Freddie Mac’s chief economist. “Interested home buyers are acclimating to the current rate environment, but the lack of inventory remains a primary obstacle to affordability.”

Despite the Federal Reserve raising its benchmark rate for the tenth time—a move National Association of REALTORS® Chief Economist Lawrence Yun called “unnecessary and harmful”—mortgage rates still fell this week. So, don’t assume the Fed’s monetary policy will lead to higher mortgage rates, says Nadia Evangelou, senior economist and director of real estate research at NAR. The Fed’s rate does not have a direct correlation to mortgage rates. “If inflation keeps slowing down, then mortgage rates will move lower,” Evangelou says.

Freddie Mac reports the following national averages for mortgage rates for the week ending May 4:

*30-year fixed-rate mortgages: averaged 6.39%, falling from last week’s 6.43% average. Last year at this time, THEY averaged 5.27%.

*15-year fixed-rate mortgages: averaged 5.76%, up from last week’s 5.71% average. A year ago, they averaged 4.52%.

Source: nar.realtor/magazine/real-estate-news and Freddie Mac