Spring home buying season shows 'steady demand' as mortgage rates fall for second week

The average 30-year fixed mortgage rate fell to 6.42% on March 23, down from 6.6% a week earlier.

The spring home buying season shows "steady demand" as mortgage rates fall for the second week in a row.

On Wednesday, the Federal Reserve raised its interest rate by a quarter of a percentage point, signaling that it could soon halt the hikes amid the worst banking crisis since 2008.

Despite the Fed's announcement this week, Redfin says his overall outlook for the housing market this spring hasn't wavered.

"Mortgage rates are expected to decrease temporarily but not plummet, and demand is expected to fluctuate up and down based on fluctuations in rates and the availability of houses on the market," the real estate brokerage company reported.

Over the past week, in particular, demand has increased as the average 30-year fixed mortgage rate fell to 6.42 percent as of March 23, down from 6.6 percent a week earlier, according to mortgage buyer Freddie Mac. As a result, the U.S. homebuyer's monthly housing payment is down from its peak two weeks ago, according to Redfin.

Redfin also noted that mortgage purchase applications increased by 17% compared to a month ago, and the number of home buyers contacting Redfin agents for tours also increased this week.

However, the problem is that there is still a limited supply of homes given that "sellers are generally slower to come back than buyers," according to the brokerage.

New listings during the four weeks ending March 19 fell 22% from a year earlier, marking "one of the biggest declines since the housing market came to a near halt at the start of the pandemic."

On top of that, Redfin predicted that competition could increase further as we get deeper into the spring, as long as rates remain closer to 6% than 7%.

Overall, though, the market is in a better place than it was a few weeks ago, according to Redfin Chief Economist Daryl Fairweather.

"The chaos and chaos of the banking industry of the past few weeks probably prevented the Fed from making a big, inflation-fighting hike this week that could have sent mortgage rates skyrocketing," Fairweather said. "They kept the increase small, partly because the banking turmoil naturally fights inflation."