Mortgage Rates Ease, Housing Market Shows Signs of Recovery
Mortgage rates have been steadily decreasing, and for many homebuyers, this is a welcome relief. According to Redfin, daily mortgage rates have fallen to 6.81%, while weekly rates have dropped to 6.77%, their lowest readings in months. This decrease in mortgage rates is giving homebuyers a boost, with some seeing thousands of dollars in new purchasing power and others experiencing lower monthly mortgage payments.
Monthly Housing Payments Drop
The typical monthly housing payment has decreased by over $100, from $2,700 in April to $2,600 in July. This is despite home prices remaining close to their record high. Redfin’s analysis notes that this is a positive sign for the housing market, as it indicates that buyers are starting to feel more comfortable making larger purchases.
Supply Continues to Rise
Another encouraging trend is the increase in new listings. As of July, new listings are 6.4% higher than last year, and the total number of listings is near its highest point in close to four years. This is a sign that the lock-in effect, which has kept sellers on the sidelines due to low mortgage rates, is starting to wear off. More homeowners are now willing to sell, as they realize that rates are unlikely to drop significantly in the near future.
Pending Home Sales and Demand Index Down
While the news is generally positive, there are some areas of concern. Pending home sales, as measured by Redfin, are down 5.6% from a year ago, the largest decline in eight months. Additionally, Redfin’s homebuyer demand index and mortgage purchase applications are also down. This could be due to buyers waiting for mortgage rates to fall further, as they are still higher than the pandemic-era lows.
Fed Rate Cuts and Mortgage Rates
The Federal Reserve’s decision to cut interest rates by the end of the year is likely to have an impact on mortgage rates. Some buyers are waiting for rates to fall further, but it’s unlikely that they will drop much lower in the next few months. Redfin’s economic research lead, Chen Zhao, notes that 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.
Where Mortgage Rates Will End Up
There is no clear consensus on where mortgage rates will end up. The National Association of Realtors’ chief economist suggests that 6% would be a new reality, while Compass’ chief executive believes that 6% is the magic number to fuel activity. However, Capital Economics predicts that mortgage rates will stay above 6.5% through the rest of the year, and may not fall below 6% for another two years.
Conclusion
In conclusion, the housing market is showing signs of recovery, with mortgage rates decreasing and supply increasing. While there are still challenges to overcome, including a lack of affordable housing and stagnant incomes, the current trends are a positive step forward.
FAQs
Q: What is the current state of mortgage rates?
A: Mortgage rates have fallen to 6.81% daily and 6.77% weekly, their lowest readings in months.
Q: How has the typical monthly housing payment changed?
A: The typical monthly housing payment has decreased by over $100, from $2,700 in April to $2,600 in July.
Q: What is the current state of supply in the housing market?
A: New listings are 6.4% higher than last year, and the total number of listings is near its highest point in close to four years.
Q: Why are pending home sales and demand index down?
A: Pending home sales and demand index are down due to buyers waiting for mortgage rates to fall further, as they are still higher than the pandemic-era lows.
Q: What is the Federal Reserve’s plan for interest rates?
A: The Federal Reserve plans to cut interest rates by the end of the year, which is likely to have an impact on mortgage rates.
Q: Where will mortgage rates end up?
A: There is no clear consensus on where mortgage rates will end up, but experts predict that they will likely stay above 6.5% through the rest of the year.
Author: fortune.com
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