Mortgage rates fell for the third straight week, triggering a slight rebound in homebuyer activity.
The rate for the average 30-year fixed mortgage fell to 6.49% this week from 6.58% the previous week, according to Freddie Mac. Rates have fallen more than half a point in the past three weeks, with inflation appearing to ease and the Federal Reserve signaling that it may reverse its aggressive interest rate hikes.
The rate cut has revived some activity in the largely cooled housing market, with buyers using the slight rate relief coupled with more profitable sellers to secure deals. Still, with rates nearly 4 percentage points higher than at the start of the year, affordability issues remain for many first-time homebuyers.
“Buyers have gained buying power by about $25,000 to $30,000 per loan application, which is fantastic,” Scott Sheldon, branch manager at New American Funding, told Yahoo Money. “However…rates aren’t low enough for buyers to be like, ‘Oh my God, I have to go make an offer on a house and get locked in immediately. That sense of urgency just isn’t there.”
Buyers gain confidence
As mortgage rates fell, more buyers rushed to secure the drop before the window closed.
Mortgage demand rose for the third week in a row, according to the Mortgage Bankers Association’s latest survey, with purchase inquiries up 4% from a week ago.
“There is always a demand for homes,” noted Jason Sharon, owner and broker of Home Loans Inc., despite rising home prices and rates. “There will always be situational shifts, people crossing states to go to college or get closer to their jobs.”
In addition to lower rates, buyers are also betting on sellers who are more willing to negotiate as demand has dried up this year.
The share of homes benefiting from a price reduction rose to 19.6% this month, from 9.2% a year ago. According to Realtor.com, that’s now well above pre-pandemic levels.
The national median list price fell to $416,000 in November, according to Realtor.com, from a high of $449,000 in June. Home prices typically decline about 2% between the summer peak and November, but this year’s 7.9% decline over this period is more pronounced than the typical seasonal slowdown.
“Buyers take the time to negotiate,” Adriana Perezchica, president of Via Real Estate Group, told Yahoo Money. “Lower rates mean that some customers have regained purchasing power and they want to take advantage of that.”
Still, housing affordability remains an issue overall, especially for first-time buyers, Mike Fratantoni, chief economist and senior vice president of research and industrial technology for the MBA, told Yahoo Money, noting that buying activity remains down 41% year-over-year.
At current rates, the buyer of a median-priced home faces a monthly payment of $2,150. According to Realtor.com, although this is an improvement from just a few weeks ago, when this figure was around $2,300, it would still represent around 40.6% of a company’s monthly income. a household earning the median of $72,000.
“Most buyers this year were in sticker shock,” Fratantoni said.
Gabriella is a personal finance reporter at Yahoo Money. Follow her on Twitter @__gabriellacruz.
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