Homebuyers will save $100 a month after mortgage rates hit their biggest weekly drop since 1981.
The 30-year fixed rate fell to 6.6 percent amid softening inflation. A week ago, the rate was more than seven percent, while 12 months ago, the 30-year fixed rate was 3.1 percent.
According to Redfin, the reduction sees new home buyers save $100 per week. The real estate company said the average mortgage payment in the United States fell from $2,542 to $2,430.
The Fed is trying to tame the hottest inflation in decades by making it harder to borrow and cutting spending.
Several broad measures of inflation showed that prices eased slightly, but other economic indicators showed that consumers as well as the job market were resilient.
The 30-year fixed rate has fallen to 6.6 percent as a result of inflation, saving the average family $100 a month.
Experts have warned that house prices will remain volatile over the next 12 months
Taylor Marr, the company’s deputy chief economist, said in a press release: “Serious buyers who need to buy a home as soon as possible may feel good about buying a home this week because it could cost them less than $100 a month. If they had signed a contract a week earlier, it would cost the same house.
He continued: “More casual buyers may want to wait a few more months as there is reason to be cautiously optimistic that the worst of inflation and higher rates are behind us and that monthly payments may fall further.”
That sentiment was echoed by George Ratiu, manager of economic research at Realtor.com, who told Money Wise: “Some buyers may want to wait and see if rates come down further.”
He continued: ‘But with inflation still north of 7 percent and the Fed continuing to raise funds rates over the next few months, the mortgage market is not out of the woods. We could still see rates rise above 7 percent by the end of the year.
The 15-year fixed rate also decreased from 6.3 percent to 5.9 percent. At this time last year, this indicator was 2.3 percent.
Despite these declines, Nadia Evangelou, chief economist at the National Association of Realtors, told Money Wise, “At 7 percent, 1 in 8 renters can afford a home at the median. In contrast, 1 in 3 renters could afford a home at the median a year ago. could afford to buy a house, prices were close to 3 percent.
“So roughly 7.9 million renters can no longer afford the typical home, while the share of first-time homebuyers has hit a new record,” Evangelou said.
Multiple reports have suggested that mortgage rates will remain volatile through the end of 2022 and home prices across the country will remain high.
Existing home sales (above) fell 5.9 percent last month from September to a seasonally adjusted annual rate of 4.43 million, the National Association of Realtors reported Friday.
Despite a sharp slowdown in transactions, the national median home price rose 6.6 percent to $379,100 in October from a year earlier. Prices have increased in all four regions
The central bank’s strategy risks pushing the economy into recession if it hits economic growth too hard.
Housing starts fell more than four percent to 1.4 million units, according to data released Thursday.
Just a day earlier, data from the National Association of Home Builders showed that confidence in the single-family home market was at its lowest point in 12 months. This marks 11 months of continuous decline in confidence, the group said.
“High interest rates have significantly dampened demand for new homes as the flow of buyers continues to decline,” NAHB Chairman Jerry Konter said in a statement on his website.
Conter also said, “With the housing sector in decline, the Biden administration and the new Congress should focus on policies that lower construction costs and allow the nation’s homebuilders to expand housing production.”
According to Wells Fargo, about 37 percent of home builders have lowered prices, while 59 percent of home builders are using other methods to incentivize new home buyers.
Coinciding with the new rate cut, mortgage applications rose 2.7 percent from last week, with home purchase applications up four percent.
Palm Beach-based broker Kevin Kent further explained the impact of falling mortgage rates.
“It can make a big difference,” he told WPBF. A 1% adjustment generally affects about $100,000 of what people can afford at the same budget level, at the same payment level. It can make a big difference, you know. I’ll tell you, it’s the prospects.”
He continued, “When I started in real estate, interest rates were 14 percent… 17 percent. People were still buying and selling houses. It’s another way to approach the market right now. So any drop like this will help a lot of disappointed buyers.
Put another way, a home buyer with a monthly budget of $2,500 could buy a $380,750 home at today’s 6.6% rate, giving them $12,000 more purchasing power than they had a week ago.
That buyer could buy a $368,750 home at last week’s 7 percent rate.
House hunters had fewer properties to choose from last month as the inventory of homes on the market fell for the third month in a row.
There were 1.22 million homes on the market by the end of October, which is equivalent to 3.3 months of supply at the current monthly sales pace.
“Inventory levels are still tight, so some homes for sale are still receiving multiple offers,” Yun said.
In October, 24 percent of the houses bought above the asking price. On the contrary, the prices of houses that have been on the market for more than 120 days have fallen by 15.8 percent on average,” said the economist.
64 percent of homes sold in October 2022 were on the market for less than a month.
First-time buyers accounted for 28 percent of purchases, down from 29 percent in September and a year earlier. All cash sales accounted for 26 percent of transactions, up from 24 percent a year ago.
The report followed news on Thursday that single-family home construction and permits for future construction fell to their lowest levels since May 2020.