Mortgage Rates Hit 15 Month Low
The average rate on a 30-year fixed mortgage fell this week to its lowest level in 15 months, easing some of the cost for would be home buyers, in an otherwise tough housing market. Even a tiny drop in mortgage rates is enough to indicate that house-hunting season will start soon, according to a new Redfin report.
The average rate today (6.35) as compared to 6.46% last week. A year ago, the rate was 7.18. This the lowest average rate since May of 2023. Rates on the 15-year fixed mortgage also fell to 5.51% from 5.62% last week. A year ago, according to Freddie Mac, the rate was 6.55%.
The report noted that the median US monthly mortgage payment was $2,587 during the four weeks ending August 18, its lowest level since February and down 0.1% from a year earlier.
Housing payments are falling because mortgage rates are falling; weekly average mortgage rates are sitting at a 16-month low, down from a peak of 7.79%. Home prices are still near record highs, up 3.6% year over year,” the report stated.
These declining mortgage rates are expected to continue due to declining inflation and a weakening job market. These factors will very likely lead to a rate cut by the Federal Reserve at their next meeting in September. If this occurs (as is widely expected), it would be the first cut in four years.
While the falling rates led to a rise in refinancing, applications for mortgages fell again, as housing prices remain elevated. Another reason applications to purchase have dipped is the likelihood the prospective buyers are expecting mortgage rates to drop further.
According to Redfin, pending home sales are down 5.3% over the past year, the largest drop in nine months. Mortgage-purchase applications are down 8 percent.
While the headline consumer price index has hovered around 3 percent over the last year as inflation has remained sticky, housing costs have been descending more steadily, with both owners’ equivalent rent (a measure of how much rent a homeowner would have to pay if they were renting their own home) and regular, everyday rent making smooth declines off recent highs. Rent, which trails overall inflation, has been falling since 2023, with owners’ equivalent rent sliding from an annual increase of 8.1 percent last April to 5.3 percent in July.
But housing prices, overall, are up 3.6% this year, still near their record highs. However, the median sales price of a house in the U.S. has fell a bit in the second quarter to $412,000 from $426,000 according to data from the U.S. Census Bureau.
The U.S. housing market has been in a deep slump, beginning in 2022, when mortgage rates began to rise. Existing home sales sank to a nearly 30-year low last year as the average rate on a 30-year mortgage surged to a 23-year high of 7.79%, according to mortgage buyer Freddie Mac.
To conclude, the average rate on a 30-year fixed mortgage hovered around 7% this year, about double what it was just three years ago. But this month, the average rate has made its biggest downshift in more than a year, dipping to 6.35%. The pullback has sparked a pickup in home refinancing loans, while applications for home purchase loans have lagged, Freddie Macs Chief economist, Sam Khater said.