Although homebuyers have gained back purchasing power since April, most continue to sit on the sidelines in the hope that the Fed will cut rates and mortgage rates will fall later this year.
But according to Chen Zhao, economic research lead for Redfin, these prospective home buyers may be waiting in vain.
“Now that it’s looking increasingly likely the Fed will cut interest rates by the end of the year, some house hunters believe mortgage rates will fall more and are waiting for that to happen before they buy,” Zhao says in a recent Redfin report. “But they may be waiting in vain; it’s unlikely mortgage rates will drop much lower in the next few months, as markets are already pricing in the expectation of a rate cut in September, followed by several more at the end of 2024 and into 2025.
“In fact, now may be the right time for house hunters to get serious about making offers before prices increase even more and they lose some power,” Zhao adds. “Plus, there are more homes to choose from, and many listings are growing stale, giving buyers an opportunity to negotiate.”
As per the report, mortgage rates dropped to their lowest level since February after the latest CPI report showed inflation cooling. Still, pending home sales posted their biggest decline in eight months.
The typical U.S. homebuyer’s monthly housing payment was $2,722 during the four weeks ended July 14 – $115 lower than April’s all-time high.
That’s despite home prices sitting just about $100 shy of last week’s record high.
Photo: Karsten Winegeart