(NASDAQ: RDFN) — According to a new report from tech-enabled real estate brokerage Redfin (redfin.com), a homebuyer with a monthly budget of $3,000 can purchase a $447,750 home with a mortgage rate of 6.85%, which averaged as of July 11. That buyer has increased their buying power by $22,500 since they were able to purchase a $425,500 home with an average interest rate of 7.5%, when mortgage rates hit a five-month high in April.
Mortgage rates fell to their lowest since March following Thursday's inflation report, and the supply of homes for sale is also increasing, giving buyers an edge ahead of increased competition.
To put home affordability in another perspective, the monthly mortgage payment for a typical U.S. home (priced at about $400,000) is currently $2,647 at a 6.85% interest rate — down nearly $200 from $2,814 at a 7.5% interest rate.
The decline in mortgage rates comes after the latest Consumer Price Index (CPI) report showed inflation slowing at a faster pace than expected, increasing the likelihood that the Federal Reserve will cut interest rates by September.
Mortgage rates are likely to continue to decline slightly ahead of expected rate cuts, but are unlikely to fall below 6% by the end of the year.
While mortgage rates are falling, sales prices are still at record highs and the total cost of housing remains historically high. Prices are unlikely to fall significantly in the near future.
Another good news for buyers is that there's more choice.
Rising inventory is also encouraging for buyers: New listings of homes for sale are up 7% year over year, and the total number of homes for sale is nearing its highest level since late 2020.
One reason more homes are coming onto the market is because homeowners locked into ultra-low mortgage rates are tired of waiting for interest rates to drop dramatically before putting their homes on the market. Interest rates have been at twice pandemic-era lows for almost two years, and homeowners are accepting the fact that if they wait for rates to drop to 3% or 4% before selling and moving on to their next home, they may end up waiting several years. The fact that interest rates are now slightly lower may lure more would-be sellers off the sidelines.
Homes are also staying on the market longer than usual: Of the homes on the market in May, more than 60% had been on the market for more than 30 days without a deal, up from 50% two years ago. Two in five (40%) homes had been on the market for more than two months without a deal, up from 28% two years ago.
The rise in homes for sale and the fact that many are going unsold means that many of the less attractive homes on the market are struggling to find buyers, meaning homebuyers in some areas can get a home for less than the asking price and have the chance to negotiate other savings, like help with home repairs and closing costs.
“Right now is a good time to close a deal for serious home seekers, at least compared to recent times,” says Daryl Fairweather, chief economist at Redfin. “The combination of lower mortgage rates, increased supply, and much of the inventory aging gives buyers more power and more options than they had earlier this year. But how long this window will last is unclear. Lower interest rates should bring many homebuyers back into the market soon, meaning more competition and home prices will soar even more than they are now. Interest rates could fall further in 2025, which would bring monthly costs down even further and create even more competition. One thing is for sure: lower interest rates will lead to more home sales.”
To view the full report, please visit: https://www.redfin.com/news/mortgage-rates-fall-payments-down
About Redfin
Redfin (www.redfin.com) is a technology-enabled real estate company. We help people find a place to live through brokerage, leasing, financing, title insurance and remodeling services. We operate the number one real estate brokerage site in the country. Our clients save thousands of dollars in commission while working with top agents. Homebuyers see homes first with on-demand tours and close fast with our financing and title services. Homesellers can rely on our remodeling team to fix up their home and sell it for top dollar. Our rental business helps millions of people across the country find apartments and homes to rent. Since our founding in 2006, we have saved our clients more than $1.6 billion in commission. We serve more than 100 markets in the U.S. and Canada and employ more than 4,000 people.
Redfin's subsidiaries and affiliated brands include Bay Equity Home Loans®, Rent.™, Apartment Guide®, Title Forward® and WalkScore®.
For more information or to contact a local Redfin Realtor, visit www.redfin.com. For housing market trends and data downloads, visit the Redfin Data Center. To be added to Redfin's press release distribution list, email us. [email protected]Click here to view Redfin's press center.
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