Great news for buyers: the latest Consumer Price Index report showed that inflation is cooling—which is good—but that news came alongside a report from Redfin that monthly housing payments have also eased back from record highs hit a few months ago, making it that much sweeter for buyers.
According to Redfin, the typical monthly housing payment was $2,722 mid-July, $115 lower than the all-time high which occurred in April.
A homebuyer on a $3,000 monthly budget can afford a $450,000 home with a 6.8% mortgage rate, which is roughly July’s average rate. 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.
Redfin further said that rising supply is another factor in favor of buyers as listings are up 6.4% year-over-year and inventory is at its 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.
“Buyers have yet to react strongly to falling rates and increasing inventory. Pending sales are down 5.6% year over year, the biggest decline in eight months, and Redfin’s Homebuyer Demand Index—a measure of requests for tours and other buying services from Redfin agents—is down 15%,” Redfin said in a recent release. “Mortgage-purchase applications are down 3% week over week on a seasonally adjusted basis. That’s despite mortgage rates falling year over year; the 6.83% daily average as of July 17 is down from 6.9% a year ago. Some buyers are sitting on the sidelines because they’re hoping mortgage rates will decline more.”
“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,” said Chen Zhao, Redfin’s economic research lead. “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.”
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