Mortgage Rates Drop to 6.09%, Sparking Housing Market Optimism

Introduction
Mortgage rates fell to 6.09% from 6.20% for a 30-year fixed loan in the week ending September 19, 2024, according to Freddie Mac. This decline is sparking renewed interest in both home buying and refinancing.

Optimism in the Market
Sam Khater, Chief Economist at Freddie Mac, explained that the drop in mortgage rates is fueling demand. While mortgage rates aren’t directly tied to the Federal Reserve’s actions, their recent half-point rate cut— the first since 2020—is already having an impact on the housing market. Lower rates are expected to continue, encouraging more buyers and sellers.

Realtor.com® economist Jiayi Xu noted that the Fed’s rate cut has boosted optimism, with more market activity anticipated this fall.

Expectations for 2024
Ralph McLaughlin, senior economist at Realtor.com, expects both buyers and sellers to increase their activity by the spring buying season. However, some may enter the market sooner, as the “Best Time to Buy” week, from September 29 to October 5, approaches. Xu added that this period could offer favorable market conditions for buyers.

The Mortgage Rate Shift
After the Fed’s half-point rate cut last week, its benchmark rate is now 4.8%, down from 5.3%, marking a significant drop. With this, mortgage rates are expected to continue falling. McLaughlin predicts that rates could dip as low as 6%, and potentially into the high 5% range by spring. Xu emphasized that this presents a great opportunity for homebuyers.

Home Prices Decline
Along with lower mortgage rates, home prices have been steadily cooling. The national median list price in August was $429,990, a 1% year-over-year drop. Sellers have been adjusting their prices to align with buyer expectations, with price cuts increasing by 33% compared to last year.

More Homes on the Market
Homebuyers now have more options, with the number of homes for sale up by 33% in mid-September compared to the previous year. Fresh listings have also increased by 6.6%, continuing a 45-week trend of rising housing stock.

Homes Taking Longer to Sell
Homes are staying on the market longer, with the average house spending eight more days on the market than at the same time last year. As buyers take advantage of lower rates and a larger selection, they feel less urgency to act quickly. Xu advises sellers to be patient and flexible in this evolving market.