Mortgage rates tumble, reach lowest level since June
For those who can find a home to buy, falling rates will provide significant relief.
Key points:
- The 30-year fixed-rate averaged 6.67% this week, the biggest one-week drop of the year.
- Inventory remains low, leaving buyers with few choices — but a rise in new listings could lead to more sales.
- Buyers of a median-priced home would save more than $240 in mortgage payments compared to October.
Mortgage interest rates have fallen to the lowest level in six months, a welcome bit of news for holiday homebuyers.
The 30-year fixed-rate mortgage averaged 6.67% this week, according to the latest Freddie Mac survey. That's down sharply from last week's 6.95%, representing the biggest one-week drop this year and the eighth consecutive week of declines.
So far, falling rates haven't led to a marked increase in pending sales since inventory remains low, but anecdotally more buyers are interested, according to Redfin's weekly market report. "There's not much for buyers to tour right now, but they're raring to go," said Shoshana Godwin, a Redfin Premier agent in Seattle.
Completed sales are showing some renewed signs of life, with existing home purchases up in November.
But a lack of inventory will continue to be a challenge in 2024, keeping prices high, said Lisa Sturtevant, chief economist at Bright MLS.
"Young buyers are having to delay homebuying as it takes them longer to save for a downpayment and they often have to make offers on multiple homes before they are successful," Sturtevant said.
While inventory is low, new listings are up 9% year-over-year according to the Redfin report, a sign that more choices are coming.
"Buyers will return from the holidays with more homes to choose from, and they should still see rates in the mid-6% range," said Redfin Economic Research Lead Chen Zhao. "But because the Fed is erring on the side of caution, there's still a chance that rates could go back up."
No boom in sales — yet
It appears that mid-6% mortgage rates may not be enough to jumpstart home sales. Applications for mortgage loans fell 1.5% this week, according to the Mortgage Bankers Association, with MBA Chief Economist Mike Fratantoni characterizing borrowers' reactions to the recent rate drops as "rather tepid."
For those who can find a median-priced home, the savings are significant. Compared to October, when rates were near 8%, today's buyers will save more than $240 a month in mortgage payments — which is especially good news for first-time homebuyers, said Jessica Lautz, deputy chief economist at the National Association of Realtors.
"First-time buyers traditionally fare better in the winter, as there is less competition from families," Lautz said.