Key points to remember:
- Now is a prime opportunity to purchase a home if you want to outshine the competition.
- Daily average mortgage rates reached a 14-month low of 6.34% on Monday, providing buyers with increased purchasing power.
- Act quickly as hesitant buyers may re-enter the market, potentially driving prices up.
- There is a 20% increase in total listings compared to last year, offering a wide range of inventory to choose from.
On Monday, August 5th, the daily average 30-year fixed mortgage rates plummeted to 6.34%, marking their lowest point since April 2023. Other loan products also saw reductions, ranging from high-5% to mid-6%. This decline was triggered by a disappointing jobs report that instilled fears of an impending recession and led to a global market slowdown.
Following the series of events, rates rose to 6.52% on August 6th – above the previous day’s lows but well below the peak of 7.5% in April. Homebuyers have gained nearly $30,000 (approximately $200 per month) in purchasing power since the start of July. Many experts anticipate the Federal Reserve to initiate interest rate cuts beyond expectations in September, potentially further reducing mortgage rates.
Total listings have also increased by 20% compared to last year, attracting more sellers to the market. The current market conditions suggest favorable opportunities for buyers. So, if you are contemplating a purchase, you might be asking yourself, “Should I buy a house now or wait?”
Is now the right time to invest in a home?
In short: Yes, it’s advisable to secure a home before the market rebounds if you have the financial means. Delaying your purchase in hopes of further rate decreases exposes you to heightened competition among buyers, potentially leading to increased prices from sellers.
Buying a property now ensures optimal investment potential. Lower rates save you money over the loan duration and allocate more of your mortgage payments towards equity accumulation.
It’s important to acknowledge the recent fluctuations in the market. For instance, while higher mortgage rates typically drive down house prices, they have had the opposite effect in recent years. Additionally, a decrease in inventory usually results in heightened competition, but prices have been too steep for many buyers, causing some homes to remain unsold while others are swiftly purchased.
Furthermore, economists are uncertain about future mortgage rate movements, and housing prices remain near a historic peak. Although the week began positively, it’s crucial to be prepared for any unforeseen developments.
Will mortgage rates continue to decline in 2024?
Current mortgage rates are indicative of investors’ expectations regarding the Federal Reserve’s actions. Investors believe the Fed will no longer restrict inflation and anticipate a gradual decline in mortgage rates through the year’s end.
In essence, economists do not foresee a significant further drop in mortgage rates as today’s rates already factor in anticipated interest rate cuts in September.
How did we arrive at this scenario?
Over the past decade, there has been a severe shortage of homes. This shortage was a contributing factor to the housing boom in 2021-2022; numerous buyers vied for limited homes, causing prices to skyrocket. Record-low mortgage rates further fueled the frenzy. (The low supply was partially due to long-standing underconstruction of homes since the 1980s.)
However, in 2023 and 2024, as construction rebounded and inventory gradually recovered, prices continued to rise despite high mortgage rates. Elevated rates typically lead to decreased demand and prices. However, this trend did not materialize as many homeowners had low rates from the pandemic era and were unwilling to relinquish them, exacerbating the shortage of available homes for sale.
This unconventional trend persists today – the national median sale price reached a record high in June, and numerous individuals are still shying away from the market. Those making purchases often target affordable regions like Texas and Upstate New York. Despite rising inventory and low sales nationwide, house prices remain at peak levels with minimal signs of decline.
Nevertheless, the recent dip in mortgage rates has injected optimism into homebuyers.
Home sellers should prepare for heightened competition
Declines in mortgage rates pave the way for increased buyer participation, resulting in intensified competition for available listings.
Buyers who refrained from entering the market due to high mortgage rates have been waiting on the sidelines for some time, especially as inventory dwindled due to sellers holding on to their pandemic-era rates (the lock-in effect). With rates now decreasing, more buyers are likely to conclude that they can afford a home.
Is it advisable to secure your mortgage rate today?
If feasible, now is an excellent time to lock in a low mortgage rate. Rates have not been this low in over a year.
Lower rates enable you to qualify for a larger loan sum or enjoy reduced payments within your existing budget. If rates still seem high, you can also lower your mortgage rate.
Cash buyers aiming to bypass mortgages entirely should also act promptly to avoid likely price hikes as rates continue to decline.
Closing thoughts
If you are planning to purchase a home but have been deterred by high rates, now is an ideal time to engage with an agent and initiate your property search. Rates are projected to continue a gradual decline, and the market is gaining momentum. Delaying your decision may result in increased competition.