Mortgage Rate Drops This Fall: What Every Buyer Needs To Know | Market Trends | Zillow
2 Video Views·Sep 10, 2024
If you’ve come up empty-handed after home shopping all spring and summer, you might want to keep your eyes peeled over the next few weeks. The market nationally has finally turned into neutral territory, putting buyers and sellers on equal footing as mortgage rates trend lower and price growth slows.
Not all bad news is all bad.
The side effect of a super soft jobs report
and rising unemployment is lower mortgage rates.
Hi, I'm Skylar Olson, chief economist at Zillow,
and this is Market Trends, where each month
I'll help you unpack what's happening in the housing market.
Newly lower mortgage rates does bring an opportunity
for those ready buyers.
Mortgage rates had remained stubbornly high,
but we've already had some relief
as financial markets start to expect
the Federal Reserve Board to act soon.
Now, the Fed doesn't set mortgage rates directly,
but they do use a broadly influential interest rate,
and that has been set higher
in order to tamp down on inflation,
and that's been going on for several months.
Now, to avoid hurting the broader economy,
and now that inflation is more in line,
the Fed is broadly expected to drop
that influential rate in September, well, maybe December.
In anticipation, average mortgage rates
are already down three quarters of a percentage point
since just May, only a little over three months ago.
Now, that translates to over 140 bucks less a month
on the typical U.S. home, now valued at 362 grand.
For my fellow Seattleites in our more expensive market,
the drop in mortgage rates since May
would save a buyer over 300 bucks.
Now, let's put things another way.
With a drop in mortgage rates,
your buyability, or the size and price
of the house you can currently access, just increased.
If a buyer could just barely afford the typical U.S. home
on May 2nd, when the average mortgage rate was 7.22,
now that rates are down to 6 1⁄2,
that's an extra 28 grand in buying power.
Now, higher buyability means the potential
to buy a bigger place, in a better area,
or a property that will need less time
and energy to feel truly yours.
The next question you might be wondering
is how long lower mortgage rates will last.
Now, the reality is mortgage rates jump around a lot,
but if current rates continue,
then the worst is likely to behind us.
Mortgage rates will be more likely
to bounce around, say, 6 1⁄2% than seven these days,
and if unemployment worsens and we do see
an urgent rate cut from the Fed in September,
mortgage rates could come down a bit more.
But keep in mind, any sign that there's still some fire
behind U.S. job markets and those inflation numbers,
and mortgage rates could swing back up.
So, the truth is, I just can't guarantee
that 7% mortgage rates aren't out
of the question in the future.
So, if you're a buyer and you're actively shopping,
this could be a sweet spot of lower mortgage rates
along with slower home price growth
and slower-paced home shopping this fall.
You should be pre-approved and get ready to share a bit
about your current situation with a lender
so that you can move quickly and move forward
on the right options for you.
Be sure to subscribe to our channel on YouTube
and our Market Trends newsletter
for all of our housing updates,
and good luck out there.