The monthly payments new buyers will have to pay for their home loans has dropped to its lowest in more than a year, real estate platform Redfin pointed out, as mortgage rates have declined in recent weeks.
Mortgage rates have dropped to about 6.5 percent after spending weeks hovering around 7 percent. That drop has helped lower the amount that prospective homeowner will have to pay in mortgage payments.
Redfin pointed out for the week ending August 11, potential homeowners will typically pay about $2,600 which is close to $250 less than when rates were at their peak in April.
Mortgage rates soared to their highest levels since the turn of the century helped by the Federal Reserve's aggressive tightening of financial conditions designed to cool record level of inflation. That move contributed to an increase in borrowing costs, including for home loans.
Recent trends have signaled that inflation may be getting close to the Fed's 2 percent target. On Wednesday, the U.S. Bureau of Labor Statistics revealed that the Consumer Price Index (CPI) inflation decelerated to 2.9 percent. This development has analysts believing that Fed policymakers will begin slashing borrowing costs as soon as next month. This could help push mortgage rates even lower, housing economists say.
"Mortgage rates have dropped considerably the last couple of months. Whether they continue sliding depends on whether the Fed is as aggressive as markets hope in cutting," Chen Zhao, an economist at Redfin, said following the CPI report release.
While mortgage rates have declined, house prices continue to be elevated.
The median sale price was up 3.4 percent to $389,250 for the week ending August 11 compared to the same time a year ago. The median asking price increased by nearly 6 percent, the largest increase since October 2022, to about $398,000.
Expensive homes may be still keeping buyers aware, according to real estate agents. Redfin's Homebuyer Demand Index, a metric that tracks buyers' interest in purchasing property, was 10 percent lower than it was a year ago.
"I was hoping more buyers would emerge when mortgage rates started declining. And while house hunting has picked up a bit, the increase isn't all that significant," Brynn Rea, a Redfin Premier agent in Spokane, said in a release. "Budgets are typically the most important factor for buyers, and homes are still really expensive for a lot of people."
Some potential homeowners may be playing a wait-and-see approach to their prospective home purchasing.
"A lot of buyers are waiting to see if mortgage rates fall more if and when the Fed cuts interest rates, and to see what happens with the economy and the election later in the year," Rea added.
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