Mortgage Rates Just Dropped Again—and More Good News for Housing This Fall

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Mortgage rates fell for the second week in a row, averaging 7.12% for a 30-year fixed-rate loan in the week ending Sept. 7, according to Freddie Mac.

This downward trend is a welcome relief after rates spiked to a 22-year high of 7.23% two weeks earlier. Still, these rates are formidable—more than double what they were two years ago when they dipped below 3%—which has ground America’s housing market to a near standstill.

“The housing market has shuffled along at a slow pace for more than a year now as the market waits for mortgage rates to stabilize or decline,” says® data Scientist Sabrina Speianu in her analysis. “Heading into the fall housing season, mortgage rates, home prices, and housing availability continue to remain a challenge for both homebuyers and home sellers who themselves may need to purchase a home as they sell their current one.”

As the autumn homebuying season unfolds on shaky ground, we’ll explain what the most recent real estate statistics mean for buyers and sellers in our latest installment of “How’s the Housing Market This Week?

What’s next for mortgage rates?

With the Federal Reserve slated to meet on Sept. 19 and 20 to discuss whether or not to raise benchmark interest rates, many are trying to read the economic tea leaves and forecast whether mortgage rates will rise or fall in response.

“All eyes are on macroeconomic indicators such as job market strength and inflation, which will guide the Federal Reserve in charting the path forward for interest rates,” says Speianu.

With the job market robust but cooling off and inflation slowing down, “the market is not anticipating the Federal Reserve to increase rates in September and it is also less likely that they will raise rates before year-end,” predicts Speianu.

With a possible end to rate hikes in sight, the housing market might just begin to inch forward.

How high mortgage rates lead to fewer listings

Until mortgage rates drop, the supply of homes for sale will remain slim.

For the week ending Sept. 2, the number of new listings sank by 8.5% compared with one year ago.

“While the number of newly listed homes increased from July to August, new home listings have once again begun to decline as is expected heading into September,” says Speianu.

Fewer sellers are listing their homes since many have low mortgage rates they’re reluctant to give up—thus locking sellers into their homes and locking buyers out. As a result, overall inventory (of both new and old listings) has also declined, lagging behind year-ago levels by 5.2%.

“In the meantime, new construction offers buyers an alternative, and new-home sales continue to climb from year-ago lows,” adds Speianu.

Home prices edge upward

As if high mortgage rates weren’t daunting enough for would-be buyers, low housing inventory has inflated home prices.

After a welcome stretch of annual price declines in June and July, median list prices rose year over year in August, to hover at a median of $435,000.

And for the week ending Sept. 2, median home prices rose by 0.2% compared with last year. But the good news is that home prices didn’t top last June’s record high of $449,000.

The bad news? Home prices are not likely to fall dramatically anytime soon.

“A renewed existing-home inventory crunch is still supporting listing prices as homebuyers find fewer opportunities compared to last year,” adds Speianu.

Why the slowing pace of home sales may speed up soon

Any sellers who can break free of their mortgage rate handcuffs will likely be rewarded with a quick home sale.

The pace of home sales has been slowing for 59 weeks, but that might soon turn a corner.

“The gap is now only two days more than the same time last year,” says Speianu. “While the demand for homes has pulled back due to affordability constraints, there are still eager home shoppers on the market browsing through a declining inventory of homes for sale.”

Margaret Heidenry is a writer living in Brooklyn, NY. Her work has appeared in the New York Times Magazine, Vanity Fair, and Boston Magazine.