Mortgage rates tumble; time for buyers to ‘get serious’ 

Mortgage interest rates continued to drop this week with growing expectations that interest rate cuts are coming.

The 30-year fixed-rate mortgage averaged 6.77%, down significantly from last week's average of 6.89, according to Freddie Mac. That's the lowest level since mid-March. The 15-year fixed-rate mortgage also fell, averaging 6.05% this week.

Both the 30-year and 15-year weekly averages are lower than a year ago, which is also a new trend.

The steady decline hasn't done much to increase demand to buy homes, a trend that's not uncommon, said Sam Khater, Freddie Mac's chief economist. "The apparent paradox is driven by buyers making sure rates don't decline further before they decide to purchase," Khater said.

Home sales activity also tends to slow during the hottest days of summer, but affordability remains the bigger obstacle, said Lisa Sturtevant, chief economist at Bright MLS.

"Mortgage rates will likely come down further over the coming months. We should expect to see both more buyers and more sellers enter the market, and we could see a market that is closer to balanced than it has been in years," Sturtevant said.

And the recent drop in mortgage rates has helped ease the affordability issue, according to the latest Redfin data. The typical homebuyer's monthly housing payment was $2,722 during the four weeks ending July 14, which is $115 lower than the April peak.

In its June report, Zillow noted that the home price growth was the lowest of any June since 2011. The company now forecasts that home prices will rise just 1% nationally through June 2025.

"Competition is easing fastest in the South – all major Southern markets are either neutral or buyer-friendly, with the exception of Dallas and Raleigh," said Sklar Olsen, chief economist at Zillow.

'The right time for house hunters to get serious'

For those who have been waiting on mortgage rates, now might be the time to jump in, said Chen Zhao, who leads Redfin's economic research team. Zhao believes the mortgage rates have now priced-in the September cuts, so they shouldn't fall much further.

"In fact, now may be the right time for house hunters to get serious about making offers before prices increase even more and they lose some power. Plus, there are more homes to choose from, and many listings are growing stale, giving buyers an opportunity to negotiate," Zhao said.

As for inventory, it continues to build but appears to be slowing, according to the Redfin report. While up 18.4% year-over-year, active listings posted the smallest increase in three months.

So far home buyers are not jumping into the market, according to the Mortgage Bankers Association. While the number of applications to refinance loans increased this week, the seasonally adjusted purchase index dropped 3% compared to a week earlier. The unadjusted purchase index is down 14% compared to a year ago.

Why are mortgage rates falling?

The 10-year Treasury yields, which influence mortgage rates, remained below 4.2% as economic data is telling investors that the economy is slowing down and inflation is easing.

The June jobs report and the core price index readings are giving the Federal Reserve signals that a cut in rates is needed.

"This development should help interest rates, including mortgage rates, continue on a downward trend," said Jiayi Xu, an economist for Realtor.com.

The Federal Reserve meeting later this month should provide more insight on the agency's intentions. While a rate cut in July is not expected, it could signal that it is ready to start cutting in September and hint at how many more cuts they think are needed in the coming months.