The monthly payments that new buyers must pay on their home loans have fallen to their lowest level in over a year, real estate platform Redfin pointed out, as mortgage rates have declined in recent weeks.
Mortgage rates have fallen to about 6.5 percent after hovering around 7 percent for weeks, a decline that has helped lower the amount of mortgage payments that future homeowners must make.
Redfin noted that prospective homeowners will typically pay about $2,600 for the week ending August 11, which is nearly $250 less than when the price peaked in April.
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Mortgage rates rose to their highest levels since the turn of the century, partly due to the Federal Reserve’s aggressive tightening of financial conditions to curb record inflation. This move contributed to a rise in borrowing costs, including for home loans.
Recent trends suggest that inflation may be approaching the Fed’s 2 percent target. On Wednesday, the U.S. Bureau of Labor Statistics reported that consumer price index (CPI) inflation fell to 2.9 percent. This development leads analysts to believe that Fed policymakers will begin to dramatically reduce borrowing costs as early as next month. This could help lower mortgage rates even further, say housing economists.
“Mortgage rates have fallen significantly in recent months. Whether they continue to fall depends on whether the Fed is as aggressive in its cuts as markets hope,” said Chen Zhao, an economist at Redfin, after the release of the consumer price index report.
Although mortgage interest rates have fallen, real estate prices remain high.
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The median sales price rose 3.4 percent to $389,250 for the week ending August 11 compared to the same period last year. The median asking price rose nearly 6 percent, the biggest increase since October 2022, to about $398,000.
Real estate agents say expensive homes may still be keeping buyers on their toes. Redfin’s Homebuyer Demand Index, an indicator that measures buyers’ interest in homes, was 10 percent lower than a year ago.
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“I was hoping more buyers would show up as mortgage rates start to drop. And while home searches have picked up a bit, the increase isn’t that significant,” Brynn Rea, a Redfin Premier agent in Spokane, said in a news release. “Budget is usually the most important factor for buyers, and homes are still very expensive for many people.”
Some potential homeowners may take a wait-and-see approach to their planned home purchase.
“Many buyers are waiting to see if mortgage rates continue to fall if the Fed cuts rates, and what happens with the economy and the election later in the year,” Rea added.
FREDERIC J. BROWN/AFP via Getty Images
