Mortgage Rates Fall to Lowest Point Since February as the Housing Market Shows ‘Signs of Change’
Mortgage rates dipped this week, with the average rate for a 30-year fixed home loan going from 6.78% last week to 6.73% for the week ending Aug. 1, according to Freddie Mac.
“Mortgage rates declined to their lowest level since early February,” Sam Khater, Freddie Mac’s chief economist, said in a statement.
While falling mortgage rates as summer winds down is very welcome news, many would-be buyers are taking a timeout, hoping for a possible larger mortgage rate cut this fall. The wait-and-see approach seems to be trickling down to all aspects of home buying and selling.
“The housing market is showing subtle signs of change this week, with new listings falling, total inventory growing, and homes spending longer on the market,” says Realtor.com® economist Joel Berner in his latest analysis.
Here’s a snapshot of the latest housing market data and what it means for homebuyers and sellers in our latest installment of “How’s the Housing Market This Week?”
The autumn mortgage rate outlook
Anticipation is running high for a substantial mortgage rate cut soon, yet Realtor.com economist Jiayi Xu advises buyers to keep their expectations in check.
“While the potential rate cut in September will be a good start to bring the rate down, subsequent drops in mortgage rates may not be as significant as many anticipated because the market is already pricing in rate cuts, and such expectation is reflected by recent rate drops,” says Xu.
In other words, without a meaty rate cut, the needle might not truly move on a housing market largely stuck in neutral due to the “lock-in effect,” says Berner.
Indeed, according to a recent analysis from Realtor.com, 86% of outstanding mortgage debt has a rate of sub-6%, and more than three-quarters have a rate of 5% or lower.
Xu thinks this could mean the housing market may remain sluggish.
Home prices fell slightly
The median listing price dipped in the week ending July 27, falling 0.2% year over year, marking 27 consecutive weeks of annual price growth below 1%. (The national median list price was $445,000 in July.)
This slump is shaped in part by a change to the mix of listings on the market as the price per square foot grows and the size of homes on the market decreases.
“As home prices hover at or near record highs, affordability continues to be the top challenge,” Xu says.
As a result, homebuyers looking for an affordable home may meet their needs with one of the smaller homes that’s currently available.
If mortgage rates fall and more sellers may list properties, more listing price cuts could also be on the way.
The number of homes for sale decreased
New listings were down by 2.3% for the week ending July 27 compared with the year prior. This dip comes after fresh listings rose for 15 of the past 17 weeks.
“Potential sellers are not seeing the price increases they hope for in the market and are choosing not to list their homes for sale,” says Berner.
Even though new listings were indeed down, the total number of houses for sale increased by 37.1% year over year in the week ending July 27. This marks a 38-week streak of growing for-sale homes compared with a year ago.
The pace of the market continues to slow
Homes spent five days more on the market for the week ending July 27 compared with this time last year. (The typical home spent 50 days on the market in July.)
Continued high prices and high mortgage rates have forced sellers to wait longer to complete their home sales.
“This summer’s slowdown has continued, as each of the past 12 weeks has seen homes sitting on the market longer than they did in the previous year,” says Berner.
While homes are selling at a slower pace recently, they are still selling faster than they were in the years before COVID-19, so homebuyers who see a great home should not wait too long to make an offer. Those who choose to wait to enter the market have reason to remain optimistic.
“With broader economic indicators remaining strong, there is hope that mortgage prices will soon fall and breathe life into the currently slow market,” Berner explains.
Julie Taylor is a writer, producer, and editor. Her work has appeared in Cosmopolitan, Redbook, and other publications.