Drop in Mortgage Rates

A drop in mortgage rates to over one-year lows has prompted some prospective buyers to resume house-hunting, according to a report from real estate brokerage Redfin (NASDAQ:RDFN).

Why It’s Important

As of Aug. 7, the popular 30-year fixed mortgage rate is near its lowest levels in months at 6.58%, following a weaker-than-expected jobs report that stoked recession fears. Despite a minor improvement in affordability, pending sales saw their biggest year-over-year decline in nine months, the Redfin report indicates.

However, the rate drop is enticing some prospective buyers back into the housing market, particularly as home prices fall from their peak amid an affordability crisis.

Context

More home buyers are entering the market after a period of depressed demand when mortgage rates exceeded 7%. On the supply side, new listings are regaining momentum after being sluggish for weeks. Homeowners had been holding onto lower fixed mortgage rates secured during an era of cheap debt while coping with the current higher rates.

By The Numbers

• The median sale price was $389,750 during the four weeks ending Aug. 4, which is over $6,000 below early July’s all-time high.
• This decline is typical for the season, while the year-over-year increase of 3.2% marks the smallest rise in nine months, suggesting a slight easing in price growth.
• New listings of homes for sale have increased by 5.9% year-over-year, marking the biggest rise in five weeks.

Key Quote

“Many of the buyers I’m working with are excited because they’ve been casually house hunting for a year, waiting for rates to come down before they make an offer. Now a lot of those buyers want to get in … before rates get too low and cause more competition,” said Shoshana Godwin, Redfin premier agent.