Unlike the price of a lot of things in this economy, the price of borrowing money to buy a house has been going down: The average 30-year fixed-rate mortgage fell to 6.5% last week, according to Freddie Mac.
Mortgage Daily News reported that this week, a top-tier mortgage is averaging just 6.3%. That’s down from earlier this year, when it was hovering around 6.75%.
Mortgage rates are coming down because they follow the rate on 10-year Treasuries, and right now, those rates are edging down. What’s going on?
Home sales typically surge in the spring and summer. But not this year.
Israel Hill, a real estate broker in Portland, Oregon, has seen list prices — especially on the most expensive homes — get cut again and again to attract buyers.
Out of the 70 deals he’s done recently, “I think 58 of them or 60 of them have sold for well under where they’ve started,” he said.
Nationwide, home prices have flattened out, just as mortgage rates are falling.
Lawrence Yun at the National Association of Realtors said he expects the 30-year fixed-rate to hit 6% by the end of the year, and make life easier for some would-be buyers.
“Any time mortgage rate moves lower — even a small amount — we do see additional people who qualify to purchase a home,” he said.
And the situation is likely to get even more favorable for homebuyers, as the Fed moves to juice a flagging economy, said Susan Wachter at the Wharton School.
“The likelihood is that the economy will slow down further, and that rates will fall further,” she said.
But that flagging economy also has negative consequences, which Portland broker Israel Hill is already seeing: More affordable homes hitting the market, as local employers lay off thousands of workers.
Hand in hand with lower mortgage rates, that’s good for would-be buyers. But he doesn’t exactly want to celebrate.
“You know we try to be gentle about going on and getting all super-excited about the interest rates going down, because it’s like ‘Yeah we’re going into a recession! Rates are coming down! Buy a house!’” he said.
Still, he said, for folks who do have steady jobs, lower rates could help unlock the dream of homeownership.