New market trends are tilting the balance in favor of buyers this week
Mortgage rates fell to their lowest level in nearly a year this week, providing relief to homebuyers as the housing market shows signs of cooling across multiple indicators, according to a new report from Redfin.
The daily average mortgage rate dropped to 6.55% on Wednesday, down from a recent peak of 7.08% in May. This decline has increased purchasing power for potential buyers, with someone on a $3,000 monthly budget now able to afford a $458,750 home – roughly $20,000 more than when rates were at their peak.
“Serious homebuyers should consider taking this window of opportunity to act fast and lock in a mortgage rate at the lowest level we’ve seen since last October,” said Chen Zhao, Redfin’s head of economics research.
The rate drop followed a softer-than-expected jobs report, which increased expectations that the Federal Reserve may cut interest rates in September. However, Zhao cautioned that rates could fluctuate when more economic data is released in coming weeks.
Beyond falling mortgage rates, several indicators point to a shifting market favoring buyers. Home-price growth has slowed significantly, with the median US asking price rising just 2.3% year-over-year during the four weeks ending August 3 – one of the smallest increases in two years.
Supply is now outpacing demand, with the total number of homes for sale up 8.5% year-over-year while pending sales declined 1.2%. This shift has given buyers more negotiating power, with many sellers now accepting offers below asking price or providing incentives like money for closing costs.
The percentage of homes selling above asking price has dropped to 26.6%, down from 31% a year ago. Additionally, homes are staying on the market longer, with median days increasing to 40 days, up six days from last year.
Redfin economists predict sale prices will fall 1% by the end of the year as sellers adjust to market conditions. However, the window for buyers may be limited, as lower mortgage rates could attract more competition and new listings have remained essentially flat year-over-year.
The median US sale price reached $396,991 during the four-week period, roughly $1,800 below the all-time high. Regional variations show Cleveland leading price increases at 13.2%, while Oakland, California, saw the largest decline at 5%.
Mortgage-purchase applications have already responded to the rate drop, increasing 2% week-over-week, suggesting renewed buyer interest in the market.
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