(Bloomberg) -- U.S. mortgage rates fell by the most in more than a decade, giving homebuyers a crack at the lowest loan costs since early 2018. The slowing housing market could use the boost.
The average rate for a 30-year loan was 4.06 percent, down from 4.28 percent last week, Freddie Mac said in a statement Thursday. The decline was the biggest since December 2008. The average 15-year rate dropped to 3.57 percent from 3.71 percent.
The housing market, damaged by a spike in mortgage rates last year that cut into affordability, is signaling that it’s getting some strength back. Two publicly traded builders, Lennar Corp (NYSE:LEN). and KB Home, credited lower rates for better-than-expected home orders. And mortgage applications for purchases rose 4 percent last week from a year earlier, according to the Mortgage Bankers Association.
Prices in many areas are so high that buyers are stretched thin, so even a small change in rates can have a big impact on purchase decisions, said Glenn Kelman, chief executive officer of brokerage Redfin Corp.
While strong job growth will help, buyers may have less confidence in the economy after a recent drop-off in stocks and headwinds gathering from Europe and China. The Federal Reserve cut its outlook for growth this year and next and forecast no interest-rate hikes for 2019.
Don’t expect lower mortgage rates to spark a surge in demand, but something more like a “stabilization,” said Robert Dietz, chief economist of the National Association of Home Builders.
“We saw an adjustment in the fall, now we’re getting a reprieve,” Dietz said.
(Updates with comment from Redfin CEO in fourth paragraph.)