Mortgage Rates Drop to 10-Month Low, Pushing Down Monthly Housing Payments

Monthly payments are falling primarily because mortgage rates have dipped to a 10-month low. But home sales are still lackluster, declining slightly from a year ago.

The typical homebuyer’s monthly mortgage payment is $2,614, the lowest level since January and down $224 from May’s all-time high, according to a new report from Redfin, the real estate brokerage powered by Rocket.

Housing payments are falling mainly because mortgage rates are falling. The weekly average mortgage rate dropped to a 10-month low of 6.58% last week in the wake of a weak July jobs report and a neutral inflation report. It’s worth noting that another reason for declining payments is the seasonality of home-sale prices; they typically peak in late spring and have begun falling by this time of year.

There are several reasons serious house hunters should consider jumping into the market:

• Mortgage rates are unlikely to fall further. Today’s mortgage rates have already priced in the Fed’s anticipated September interest rate cut; Redfin head of economics research Chen Zhao says the actual rate cut won’t move the needle. Homebuyers have gained about $20,000 in purchasing power since rates hit a peak in May; it’s a good time to lock in a payment.
• Home prices are rising. Monthly payments are falling despite home-sale prices increasing from a year ago. The median U.S. sale price was $394,498 during the four weeks ending August 17, up 1.9% year over year, the biggest increase in four months. Prices may continue accelerating because inventory is decelerating.
• Supply of for-sale homes is dwindling. New listings are up just 0.5% year over year, and while the total number of homes for sale is up 10.7%, that’s the smallest increase in nearly 18 months. Some would-be sellers are pulling back because demand is slow, and they don’t want to sell their homes for less money than expected.
• Homes are taking a long time to sell, giving buyers negotiating power—for now. The typical home is spending 42 days on the market before going under contract, a week longer than last year and the longest span for this time of year since 2019. Redfin agents report that for listings sitting longer than a few weeks, sellers are often willing to negotiate. They’re accepting offers under asking price and/or making concessions to close the deal.

“I’m telling serious buyers that they have leverage right now—and in the Bay Area, that has been unheard of for a long time,” said Josh Felder, a Redfin Premier agent in San Francisco. “There’s less competition than usual because of economic uncertainty, and the market is no longer tilted in sellers’ favor. I just submitted an offer for a client on a townhouse in Mountain View, which is in Google land and would have gotten between five and 10 offers a year ago. We offered close to the asking price with no competition, and got it. Prices are still high, but first-time buyers have a window.”

For Redfin economists’ takes on the housing market, please visit Redfin’s “From Our Economists” page.

To view the full report, including charts, please visit:
https://www.redfin.com/news/housing-market-update-mortgage-rates-fall-to-10-month-low

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