Home buyers will save themselves $100 a month after mortgage rates suffered their biggest weekly drop since 1981.
The 30-year fixed rate fell to 6.6 percent in the wake of soft inflation. A week ago, the rate was more than seven percent while 12 months ago, the rate for the 30-year fixed rate was 3.1 percent.
According to red fin, drop to see new homebuyers save themselves $ 100 per week. The real estate company said that the average mortgage payment in the US fell from $2,542 to $2,430.
The Fed is trying to tame the hottest inflation in decades by making borrowing more difficult and cutting spending.
Some large measures of inflation have shown that prices are easing a bit, but other economic indicators show that consumers are still resilient, as is the job market.
30-year fixed rate drops to 6.6 percent in wake of soft inflation, saving average family $100 per month
Experts have warned that house prices will continue to fall in the next 12 months
The company’s deputy chief economist Taylor Marr said in a press release: ‘Serious buyers who need to buy a home as soon as possible can feel good about leasing a home this week, knowing that it can cost them more than $100 less per month than that. the same house would have cost if they’d signed the deal a week earlier.’
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 high rates are behind us, and monthly payments can go down again.’
The sentiment was echoed by George Ratiu, economic research manager at Realtor.com, who told Money Wise: ‘Some buyers may want to wait and see if the price will drop even lower.’
He continued: ‘However, with inflation still north of 7 percent and the Fed committed to keep increasing funding rates over the next few months, the mortgage market is not out of the woods. We can still see rates rebound above 7 percent before the end of the year.’
The 15-year fixed rate also fell to 5.9 percent from 6.3 percent. This time last year, the rate was 2.3 percent.
Despite this drop, senior economist for the National Association of Realtors, Nadia Evangelou, told Money Wise: ‘At 7 percent, 1-in-8 renters can afford to buy a median-priced home. In contrast, almost 1-in-3 renters could afford to buy a median-priced house a year ago when the cost was close to 3 percent.’
“Thus, about 7.9 million renters can no longer afford to buy a regular home, while at the same time, the share of first-time home buyers reached a new record,” said Evangelou.
Some reports have suggested that mortgage rates will remain volatile until the end of 2022 with house prices still high across the country.
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 said Friday.
Despite the sharp slowdown in transactions, the national median home price rose 6.6 percent in October from a year earlier, to $379,100. Prices are up in four areas
The central bank’s strategy risks sending the economy into recession if it brakes too much on economic growth.
According to data released on Thursday, housing starts fell more than four percent to 1.4 million units.
Just days earlier, data from the National Association of Home Builders showed that confidence in the market for single-family homes was at its lowest point since 12 months. It marks 11 months of consistently declining confidence, the group said.
In a statement on their website, the head of NAHB Jerry Konter said: ‘High interest rates have significantly weakened the demand for new homes as the traffic of these buyers has become increasingly scarce.’
Konter also said: ‘With the housing sector in recession, the Biden administration and the new Congress must turn their focus to policies that lower building costs and allow our nation’s home builders to expand housing production.’
Around 37 percent of homebuilders have cut prices while 59 percent of homebuilders are using other methods in an effort to incentivize new home buyers, according to Wells Fargo.
At the same time as the new rate drop, mortgage applications were up 2.7 percent from last week on top of the four percent increase in home purchase applications.
Palm Beach-based broker Kevin Kent explained further the impact of falling mortgage rates.
He said the news WPBF: ‘It can make a big difference. A 1% adjustment generally impacts about $100,000 of what people can afford to buy and live at the same budget level, the same payment level. It can make a big difference, you know. I’ll tell you, that’s the point of view.’
He continued: ‘When I started in real estate, the interest rate was 14 percent … 17 percent. And people still buy and sell houses. It’s a different way of approaching the market today. Therefore, a dip like that will help many buyers who have been frustrated.’
To look at it another way, a home buyer with a monthly budget of $2,500 can afford a $380,750 home with a rate of 6.6% today, giving them $12,000 more purchasing power than a week ago.
The same buyer could buy a home for $368,750 with a 7 percent rate last week.
Last month, house hunters had fewer properties to choose from as home inventory on the market fell for the third month in a row.
About 1.22 million homes were on the market at the end of October, which amounts to 3.3 months of supply at the current monthly sales rate, NAR said.
“Inventory levels are still tight, which is why some homes for sale are still receiving multiple offers,” Yun said.
‘In October, 24 percent of houses received more than the asking price. On the other hand, houses sitting on the market for more than 120 days saw the price decrease by an average of 15.8 percent, said the economist.
Sixty-four 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 ago. All-cash sales made up 26 percent of transactions, up from 24 percent a year ago.
The report followed news on Thursday that new single-family home builds and permits for future construction rose to their lowest levels since May 2020.