According to real estate firm Redfin, the recent drop in mortgage rates means that some potential homebuyers could now afford homes worth $25,000 more.
After reaching their highest levels in decades, mortgage rates have started decreasing, making it more affordable for buyers to secure loans. On Thursday, Freddie Mac announced that the 30-year fixed rate dropped to 6.77 percent, marking the lowest point since March.
This decrease in rates has strengthened homebuyers’ position in the market, giving them better purchasing power. For example, buyers planning to spend $3,000 a month on mortgage payments could now afford a property priced at $450,000 with rates at around 6.8 percent. This is an increase from April when rates were at 7.5 percent, allowing them to buy a home only costing $425,000.
Redfin highlighted that the average monthly housing payment for U.S. homebuyers was $2,722 recently, $115 less than the peak in April. This decrease is notable considering that home prices remain close to last week’s record high.
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Additionally, buyers now have more options in the market, with new listings up by 6.4 percent compared to a year ago and at their highest levels in four years, as reported by Redfin.
However, the market has yet to fully recover from the lull experienced during the spring and early summer months. Pending sales have decreased by nearly 6 percent, the largest drop in eight months, despite the recent slowdown in rates.
Homebuyers might still be surprised by the prices of homes listed for sale since prices remain high. The median asking price for a home in the U.S. is currently $405,000, a 5 percent increase from the previous year. The median sales price is close to $400,000, up around 4.4 percent year-over-year, according to Redfin.
Some potential buyers are also waiting for further decreases in interest rates in the upcoming months. Chen Zhao, Redfin’s economic research lead, noted that while it’s expected the Fed will cut interest rates later this year, mortgage rates might not decrease much more.
With the anticipation of a rate cut in September and several more to follow, Zhao suggested that now could be the right time for buyers to make serious offers before prices go up further. Moreover, with more homes available and many listings becoming stagnant, buyers have an opportunity to negotiate.