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Mortgage rates decline yet again

Mortgage rates slipped lower again this week, offering some buyers a window of opportunity ahead of the spring-selling season.

The rate on the average 30-year fixed mortgage decreased to 6.13% from 6.15% a week prior, according to Freddie Mac. Rates have been moving lower as signs of cooling inflation bolster investors’ expectations that the Federal Reserve will slow its interest-rate hikes.

With rates down more than three-quarters of a point since the end of October and seller concessions becoming more common, some homebuyers have ventured back into the market, while a still small, but growing pool of homeowners are finding that refinancing makes financial sense.

“There are value buyers thinking, ‘if everyone else is sitting at home waiting to see what the economy is going to do, I want to take advantage by getting discounts,’” Jeff Reynods, broker at Compass and founder of UrbanCondoSpaces.com, told Yahoo Finance. “At the same time, there’s absolutely a crowd that was beaten up last cycle and couldn’t buy when it was highly competitive. They may want to get back into the market before competition picks up again.”

Still ‘home-buying activity remains tepid’

The volume of mortgage applications to purchase a home rose 3% for the week ending January 20, the Mortgage Bankers Association (MBA) found, following a 25% week-over-week increase for the previous week. Still, purchase activity remains 39% lower from a year ago.

“Home-buying activity remains tepid, but if rates continue to fall and home prices cool further, we expect to see potential buyers come back into the market,” Joel Kan, MBA’s vice president and deputy chief economist, said in a news statement. “Many have been waiting for affordability challenges to subside.”

While the median listing price edged down to $400,000 in December from its peak of $449,000 in June, the price is still 8.4% higher than a year earlier, according to Realtor.com data. And even though rates have softened recently, the cost of financing 80% of a typical home purchase is still 58.9% higher compared with a year ago, Realtor.com estimated.

But for the buyers back in the market now, they are capitalizing on the uptick in price reductions and seller concessions to make the numbers work. For instance, one of Reynolds’ clients got the seller to pay $35,000 in closing costs and buy down the buyer's mortgage rate from 5.65% to 5.25%.

“I had two clients that paused their purchase plans in September. Now they are coming back,” Reynolds said. “We’re going in [and] negotiating with sellers to not only pay down the rate, but also cover closing costs.”

A woman stands near a 'for sale' sign displayed outside a townhouse style building in Los Angeles, California. (Credit: Allison Dinner/Getty Images)
A woman stands near a 'for sale' sign displayed outside a townhouse style building in Los Angeles, California. (Credit: Allison Dinner/Getty Images)

Refinance activity rekindles

The steady decline of rates in recent weeks has also rekindled some refi activity, the MBA found. The volume of refinance applications jumped by 15% compared with the previous week. Still, overall activity is 77% lower versus a year ago.

According to Monte Miner, real estate agent at Ironwood Fine Properties, some of that renewed refinance activity could be from homeowners who purchased last year when mortgage rates topped 7%.

“The general rule of thumb is that you want to save one percentage point when you refinance,” Miner told Yahoo Finance. “If you have a rate in the 7s or above, there might be an opportunity in the future.”

Gabriella is a personal finance reporter at Yahoo Finance. Follow her on Twitter @__gabriellacruz.

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