Sign of things to come? July relief for homebuyers as rates fall

Typical homebuyer gains $25,000 in buying power from April to July

Sign of things to come? July relief for homebuyers as rates fall

Typical homebuyer gains $25,000 in buying power from April to July

The typical homebuyer’s monthly housing payment was $2,722 during the four weeks ending July 14, Redfin reported.

That’s $115 lower than the all-time high reached in April, despite typical home prices just $100 lower than their own record peak set last week. The ebb of mortgage rates to their lowest level since February, due in large part to the encouraging June inflation report, have helped would-be buyers squeeze a little bit of extra affordability from the difficult market.

Per Redfin’s data, a homebuyer with a $3,000 monthly budget can currently afford a $450,000 home at a mortgage interest rate of 6.8%, the daily average as of July 17. Compare that to a $425,000 home on the same budget back in April, when rates hit a recent high of roughly 7.5%.

Prospective buyers are also getting some help in the form of growing supply, with new listings up 6.4% year over year and the total number of listings close to their highest in nearly four years. However, the buying pool has yet to react en masse to such developments; pending sales, per Redfin’s numbers, are down 5.6% annually, the biggest drop in eight months. And Redfin’s proprietary Homebuyer Demand Index, which tracks requests for buying services from Redfin agents, is down 15% from the same time last year.

Many buyers are still holding out hope for lower rates soon, said Redfin economic research lead Chen Zhao.

“Now that it’s looking increasingly likely the Fed will cut interest rates by the end of the year, some house hunters believe mortgage rates will fall more and are waiting for that to happen before they buy,” Zhao said. “But they may be waiting in vain; it’s unlikely mortgage rates will drop much lower in the next few months, as markets are already pricing in the expectation of a rate cut in September, followed by several more at the end of 2024 and into 2025.

“In fact, now may be the right time for house hunters to get serious about making offers before prices increase even more and they lose some power,” Zhao added. “Plus, there are more homes to choose from, and many listings are growing stale, giving buyers an opportunity to negotiate.”

There may be another factor holding back home sales: Frankly, it may just be too darn hot.

“Severe heat waves are making people feel pretty much locked in their houses,” noted Kristin Sanchez, a Redfin agent based in Nashville. “They don’t want to come out to see homes because it’s miserable outside; open houses haven’t been getting much traffic.”

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