The average 30-year fixed-rate mortgage fell to 5.98% this week, the first time rates have dipped below 6% since September 2022, according to Freddie Mac.

The decline comes after the Federal Reserve cut its benchmark interest rate three times last year, pulling mortgage rates down from a recent peak of around 7.8% in October 2023. Analysts also point to a January executive order directing Freddie Mac and Fannie Mae to purchase $200 billion in mortgage-backed securities as a contributing factor, since increased demand on the secondary market allows lenders to offer lower rates.

Housing experts say the sub-6% threshold carries psychological weight. Kate Wood, a housing expert at NerdWallet, says some buyers have held off waiting for lower rates, and some homeowners have been reluctant to sell and give up their older, cheaper mortgages. A rate below 6% may be enough to nudge both groups back into the market.

Still, the data suggests the housing market hasn’t fully thawed. Mortgage applications rose 2.8% last week, but the increase was driven by refinancing — not new home purchases.

Affordability also remains a significant challenge. The median U.S. home sale price at the end of last year was $405,000, and a persistent housing shortage continues to constrain supply. Jack Krimmel, senior economist at Realtor.com, warned that without more supply — from new construction or existing listings — rising demand could simply push home prices higher, canceling out the benefit of lower rates.

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