Washington (CNN) – Mortgage rates continued to decline this week, easing some more pressure on the strained U.S. housing market, as the Federal Reserve steps up its efforts to keep the economy in balance.
The standard 30-year fixed-rate mortgage averaged 6.09% in the week ending Sept. 19, Freddie Mac reported Thursday, down from 6.20% last week and substantially below the two-decade high of 7.79% reached last fall. It is the lowest level since early February 2023.
The latest news on mortgage rates is an encouraging sign for buyers who are sitting on the sidelines waiting for housing affordability to improve.
A separate report from the National Association of Realtors (NAR) released Thursday showed that U.S. existing home sales fell sharply in August, even as mortgage rates plummeted that month. . But with mortgage rates continuing to trend downward, much more housing demand is likely to be unleashed on the market after the Federal Reserve finally cut interest rates this week for the first time in four years, and signaled further cuts. of rates by the end of the year.
Sales of existing homes, which make up the vast majority of the market, fell 2.5% in August from the previous month, to a seasonally adjusted annual rate of 3.86 million, according to NAR data. It was the lowest level of sales in August since 2010. Meanwhile, house prices continued to rise last month, with the median price of an existing home rising 3.1% to $416,700, the 14th consecutive year-over-year increase and a record for house prices in August.
“Home sales were disappointing again in August, but the recent decline in mortgage rates, coupled with rising inventories, is a powerful combination that will create the environment for sales to increase in the coming months,” Yun said. in a statement.
Buying a home has become more difficult for millions of Americans in recent years, with mortgage rates rising following the Federal Reserve’s increase in borrowing costs and house prices soaring. housing when many markets were struggling with housing shortages. This caused the housing market to languish last fall, and just as the recovery was beginning to take hold in early 2024, that momentum was cut short as the Federal Reserve was forced to hold rates much longer than expected to curb inflation. persistent inflationary pressures.
Now, the entire US economy has entered a new chapter, after the Fed on Wednesday delivered the first rate cut since the start of the Covid-19 pandemic in early 2020. Fed officials expect their rate key interest rate, which influences borrowing costs across the economy, will be cut by half a point by the end of the year.
Mortgage rates could very well fall further, but that would depend on economic data making it clear that the Federal Reserve will cut rates further.
The Federal Reserve does not control mortgage rates, but its decisions influence them through movements in bond yields. Mortgage rates track the yield on the 10-year U.S. Treasury, which moves in anticipation of the Fed’s rate decision. For example, when the July jobs report showed that payroll growth was weaker than expected that month and unemployment rose, yields fell because it meant the Federal Reserve would likely lower rates soon. Yields also fell as inflation continued to moderate.
“So far, buyers who have waited can be glad they did,” Daniele Hale, chief economist at Realtor.com, wrote in a note Thursday. “Not only have mortgage rates continued to decline in early September, but we are also approaching the seasonal prime for homebuyers, when competition typically wanes, home prices soften, and time on market tends to slow. increase”.
Yun told reporters it could take three or four months for lower mortgage rates to boost housing demand.
“Some people have to first tell their landlord, ‘I’m ending my lease in a couple of months,’ especially first-time buyers, and then they look for a home, that whole process. I think that will take about three or four months, so since mortgage rates already went down in July, that should start to show in October,” Yun said.
