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The median monthly mortgage payment in the United States declined to $2,631 for the four weeks ending Aug. 10, the lowest level in seven months, real estate brokerage Redfin said in an Aug. 14 statement.
The typical monthly amount is down $215 from the May peak of $2,846. Last week, payments dropped or remained flat for the 12th straight week.
The brokerage attributed improved affordability to the decline in mortgage rates to 6.53 percent as of Aug. 13, the lowest since October last year.
A buyer now has around $20,000 more purchasing power on a $3,000 monthly budget than in May, when rates peaked at 7.08 percent, it said.
Meanwhile, Chen Zhao, Redfin’s head of economics research, warned buyers about the risk of delaying securing home deals.
“The mortgage rates that buyers can lock in today have already priced in the likelihood that the Fed will cut rates on September 17,” Zhao said.
“That means that mortgage rates are unlikely to drop any further when the Fed actually makes the expected cut. And the window to snag a mortgage rate in the mid-6s may be limited: Increased rate volatility is expected in coming weeks as new economic data is released.”
According to Freddie Mac data, the average weekly rate on a 30-year fixed-rate mortgage has consistently remained above the 6 percent level since mid-September 2022, keeping housing costs elevated. Since the beginning of the year, rates have consistently been above the 6.5 percent level.
Compared to the weekly peak of 7.04 percent hit in mid-January, the current weekly rate of 6.58 percent on a 30-year fixed-rate mortgage represents a nearly 50 basis point savings for prospective buyers.
Another factor favoring buyers is that there is now a larger number of sellers in the housing market, Zillow said in an Aug. 13 post.
“This dynamic creates a significant opportunity for those who can afford to purchase a home. With less competition, today’s buyers benefit from lower mortgage rates, more inventory, and improved negotiating power. The market continues to shift in their favor,” the company said.
Mortgage and Fed Rates
For housing payments to go even lower, it would require mortgage rates to come down more, which in turn necessitates the Fed’s benchmark interest rates to decline from current high levels.
The Fed rates have remained in a range of 4.25 to 4.5 percent since December, with the central bank opting not to lower them in five consecutive meetings.
However, recent labor data could pressure the Fed into lowering rates.
The Labor Department’s employment report released on Aug. 1 showed that unemployment rose to 4.2 percent in July. Plus, the department also revised down previous job growth data for May and June.
During an Aug. 9 comment at the Kansas Bankers Association, Michelle Bowman, the Federal Reserve’s vice chair of supervision, said the job data aligns with the concerns about labor market fragility and suggested implementing three rate cuts this year.
On the flip side, inflation complicates the decision. While the annual inflation rate in July remained unchanged at 2.7 percent, core inflation—which excludes volatile energy and food prices—rose to 3.1 percent.
In an Aug. 12 commentary, Lisa Sturtevant, chief economist at real estate data company Bright MLS, said that while the prospects for a Fed rate cut in the upcoming September meeting jumped after the July employment report, inflation will “still be a concern” for the central bank.
“Even with core inflation at 3.1 percent, the fact that overall inflation did not increase in July suggests that the Fed will cut rates in September, probably by a quarter of a percentage point,” she wrote.
However, “a Fed rate cut does not mean lower mortgage rates. With inflation still sticky, mortgage rates could remain elevated even if there is a cut. Prospective home buyers who have been waiting for mortgage rates to come down may continue to be disappointed,” she said.
Sturtevant predicts that homebuyers will delay their decision to purchase a home until next year, when the economy may become “more certain,” with inflation and mortgage rates potentially lower.
