Demand for mortgages is dropping and so are interest rates

Homeowners are seeing a bright spot in the market this month as mortgage rates have fallen slightly and the number of homes available for purchase has risen.

Home inventory, the industry term for the number of homes for sale, grew 29% compared to a year ago, according to data from Realtor.com. Meanwhile, the average 30-year fixed-rate mortgage rate dropped to 5.3% this week, according to Freddie Mac, from 5.8% two weeks ago.

Falling rates are good news for home buyers, but it’s still a far cry from the lower-than-3% figures buyers saw last July, said Realtor.com chief economist Danielle Hale .

“While we’ve seen rates go down a bit this week and last week, they’re still much higher than this time a year ago,” he told CBS News.

Hale said homebuyers shouldn’t expect mortgage rates to drop to 3% soon. The Federal Reserve is trying to defend inflation by raising interest rates and this move will keep mortgage rates high for the foreseeable future, he said.

Home buyers have faced a very hot housing market this year marked by house prices in the $ 500,000 range, soaring mortgage rates and fierce competition from high-income buyers. The rising cost of buying a home drove the dream of owning a home beyond the reach of some middle-class Americans, many of whom decided to stop buying and return to rent.

“The market is getting a lot harder for home buyers – we see some of them abandoning and putting their plans on hold,” Hale said.

In fact, the number of mortgage applications fell nearly 5.5% last week, according to data from the Association of Mortgage Bankers. Mortgage rates have been and continue to be relatively high this year and that is why “applications to buy homes and refinancing remain depressed,” Joel Kan, the association’s associate vice president, said in a statement Wednesday.

Economists said not everyone rescued the housing market. Some chose to keep it and keep looking for a deal. Buyers who are still in the market should focus on getting a home where loan repayment and interest rates are below their budget, Hale said. “I say check your budget,” he said.