Buyers get a slight reprieve as rates fall, sellers cut prices
There could be a window of opportunity for would-be buyers as mortgage rates continue to ease and homes sit on the market longer, prompting price cuts.
Key points:
- Mortgage rates fell to 6.87% this week, but don’t expect significant drops in the coming months, one economist said.
- Compared to a year ago, there are more listings available and homes are sitting on the market longer, a Redfin report indicates — but prices have reached record highs.
- Buyers may have a better shot at scoring a home if they’re willing to do some repairs, as move-in ready properties are in high demand.
As the summer home-shopping season quickly approaches, buyers may be getting some momentary relief.
Mortgage rates dipped for a third straight week, with the average 30-year mortgage landing at 6.87% this week, according to Freddie Mac. While far above the historic lows many home shoppers still pine for, the drop should be helpful to buyers who were seeing rates around 7% or higher just a few weeks ago.
Rates aren't likely to fall steeply in the near term, suggested Realtor.com Economist Jiayi Xu, given the Fed's ongoing fight against inflation. However, "significant drops in mortgage rates are necessary to encourage more sellers to re-enter the market," Xu said, adding that many buyers are still playing the waiting game before returning to the housing market.
"In the meantime, today's homebuyers will continue to encounter relatively high borrowing costs, despite the potential benefits of lower inflation and mortgage rates," Xu said. "It's important to recognize that mortgage rates are likely to remain well above the 3.5% to 5% range that prevailed in the decade before the pandemic."
Price cuts are up — but so are home prices
In a good news, bad news report, Redfin noted that homes are sitting on the market longer than they were a year ago, and the share of homes with price cuts is at the highest level since November 2022 — which could embolden some buyers to make an offer.
But the bad news? That uptick in price cuts may be offset by home prices that continue to hit new highs. Redfin's report indicated that the median home sale price is up nearly 5% year-over-year to $396,000 — an all-time high.
For buyers who can afford those prices, however, more options are available: Active listings are up 16.5% compared to a year ago.
But they'll need to act fast, especially if they want a move-in ready home. "Buyers are still out there and they're willing to pay today's high prices, but only if the house is in really good shape. They don't want to spend extra money on paint or new appliances," Des Bourgeois, a Redfin Premier agent in the Detroit area, said in the report.