Lower Mortgage Rates and Additional Homes For Sale Give Homebuyers Some Relief

Redfin recently reported that the typical US homebuyer’s monthly housing payment was $2,722 during the four weeks ending July 14th, approximately $115 lower than April’s all-time high—despite home prices sitting just about $100 shy of last week’s record high.

Daily average mortgage rates have dropped to their lowest level since February after last week’s cooler-than-expected inflation report, bringing homebuyers a bit of relief, Redfin said. As an example, Redfin calculates that a homebuyer on a $3,000 monthly budget can afford a $450,000 home with a 6.8% mortgage rate, roughly the daily average as of July 17th. That buyer has gained about $25,000 in purchasing power since rates hit a five-month peak in April, when they could have bought a $425,000 home with a 7.5% rate.

Another piece of promising news for home buyers is the rising supply of homes on the market, Redfin noted. New listings are up 6.4% year-over-year, and the total number of listings is near the highest level in almost four years. More homeowners are selling because they’re tired of waiting for rates to drop significantly; it has been more than two years since they started rising from pandemic-era lows.

Adding background and analysis to the report, Redfin Economic Research Lead Chen Zhao said:

“Now that it’s looking increasingly likely the Fed will cut interest rates by the end of the year, some house hunters believe mortgage rates will fall more and are waiting for that to happen before they buy. But they may be waiting in vain; it’s unlikely mortgage rates will drop much lower in the next few months, as markets are already pricing in the expectation of a rate cut in September, followed by several more at the end of 2024 and into 2025. In fact, now may be the right time for house hunters to get serious about making offers before prices increase even more and they lose some power. Plus, there are more homes to choose from, and many listings are growing stale, giving buyers an opportunity to negotiate.”