The average 30-year fixed mortgage rate has fallen from 7.08% to 6.42% since the beginning of November, according to the Freddie Mac Primary Mortgage Market Survey (PMMS). A major reason for this recent drop in mortgage rates is the projected slowdown in Fed rate hikes, due to a decline in inflation expectations and possible economic fallout from the banking crisis, which increases U.S. recessionary risks.
Homebuyers biggest hurdles in being able to buy a home is usually the lack of down payment and the overall affordability in mortgage monthly payments. This is especially relevant in this time of increased borrowing costs. With that said, a mortgage payment could be similar to a rental payment in a hot housing market. Also keep in mind that many mortgage companies offer low down payment mortgage products.
A recurring issue over the previous few years is the lack of supply of homes for sale. This is especially true in the big metropolitan areas of the United States. With that said, we are starting to see a turnaround with the number of available homes for sale has increased by more than 67%, according to Realtor.com.
Even with this increased amount of housing available, many sellers haven’t dropped their offer prices. Sellers have yet to adjust to a market of fewer prospective homebuyers. We believe sellers will soon start lowering their listing prices to increase demand. This should encourage homebuyers who might be hesitant to trade up if they currently have a low mortgage rate. Lower listing prices would also help first time-homebuyers might have affordability issues. Very-desirable regions where there still might be bidding wars might not see home prices decrease as much as other parts of the country.
Even in this time of elevated mortgage rates, buying a home can still make financial sense. Remember, your monthly principal and interest payments cannot change if you have a fixed mortgage rate. If mortgage rates decline, you may be able to refinance your mortgage to drop your mortgage payment. In the rental markets, rents have been increasing faster than the speed of inflation.
If you are looking to buy a house in the coming months, make sure that you are pre-approved by a mortgage lender. A pre-approval will let you know how much of a home you can afford. It will give you an idea of what range of home prices you can shop in, while also providing insight into how much your monthly payment will be. When it comes time to make your offer, the pre-approval letter will make your bid more competitive.