Redfin economists say the recent dip in mortgage rates gives serious house hunters a window of opportunity to lock in a lower monthly housing payment.
The daily average mortgage rate dropped to 6.57% on August 4, the lowest level in 10 months. That means a homebuyer on a $3,000 monthly budget has gained roughly $20,000 in purchasing power since May, when the daily average rate hit a recent peak of 7.08%.
A buyer on that budget can afford a $458,750 home with today’s mortgage rate, compared to the $439,000 home they could have bought with May’s peak.
To look at affordability another way, the monthly mortgage payment on the median-priced U.S. home, which goes for roughly $447,000, is $2,862 with today’s average rate. In mid-May, when rates were sitting above 7%, the monthly payment would have been $2,983, over $100 more.
Mortgage rates fell over the weekend following a weaker-than-expected July jobs report. The U.S. added fewer jobs than anticipated, and the unemployment rate ticked up, which pushed up the chances of the Fed cutting interest rates in September.
“This dip in mortgage rates gives house hunters a window of opportunity to buy before summer ends,” said Daryl Fairweather, Redfin’s chief economist. “While housing costs are still fairly high, the recent decline in rates boosts purchasing power and improves overall homebuying conditions. Combined with the surplus of homes for sale on the market, serious buyers may want to jump in sooner rather than later.”
House hunters should take note that there are hundreds of thousands more home sellers than buyers in the market, giving many prospective buyers an opportunity to negotiate home prices down and ask for concessions. But the gap between sellers and buyers is starting to shrink as new listings decline, with would-be sellers opting to stay put instead of listing their home in a buyer’s market.
