A surprise drop in mortgage rates got homebuyers off the sidelines and into home tours. However, affordability and recessionary concerns have kept buyers from making purchases.
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A surprise drop in mortgage rates brought homebuyers out of the shadows in July, according to Seattle-based brokerage Redfin’s latest market report.
Thirty-year mortgage rates dropped to a daily average of 6.34 percent on Aug. 5, the lowest level since April 2023. Although the daily average has since risen to 6.58 percent, it’s still a needed reprieve. In the last month alone, moderating rates have given homebuyers a $30,000 boost in buying power, boosting the typical buyers’ budget from $437,000 to $466,000.
Thankfully, the drop in mortgage rates has coincided with cooling median sale price growth.
The median sale price for the four weeks ending Aug. 4 was $389,750, a 1.51 percent or $6,000 drop from early July’s all-time high of $395,750. Although the 1.51 percent change represents a “typical seasonal decline,” it also represents the smallest annual increase (+3.2 percent) in median sales prices since December.
Moderating mortgage rates and home prices have encouraged homebuyers to begin weighing their options, as evidenced by several key touring metrics. The Redfin Homebuyer Demand Index, which tracks requests for tours and other homebuying services from Redfin agents, declined 13 percent year over year, the smallest decline in three months. Meanwhile, ShowingTime tour requests have increased 13 percent from January, and Google searches for “home for sale” rose 4 percent from June.
However, increased interest hasn’t translated to sales just yet. Pending sales, a forward-looking indicator based on contract signings, logged its largest annual decline in nine months at -6.7 percent. The late-July drop in mortgage rates didn’t yield an increase in offers written with Redfin agents, the report said.
Shoshana Godwin
Despite the stall in offers and pending sales, Seattle-based Redfin Premier agent Shoshana Godwin said she’s seeing more homebuyers move forward on their plans as they fear rates will drop “too low” and spark a 2020-esque frenzy.
“Many of the buyers I’m working with are excited because they’ve been casually house hunting for a year, waiting for rates to come down before they make an offer,” she said in a written statement. “Now a lot of those buyers want to get in now, before rates get too low and cause more competition.”
Unlike in 2020, where homebuyers snapped up whatever was available, she said today’s homebuyers are very discerning — only making offers on move-in ready listings.
“One of my listings, which went on the market last week, had over 100 parties come through and received nine offers,” she said. “Buyers are securing lower rates than they were a few months ago, but costs are still high enough that buyers are picky. If they’re going to have a high monthly payment, they want a move-in ready home so they don’t have to pay for upgrades.”
It looks like homebuyers will have more to choose from in the coming months, as new listings rose 5.9 percent year over year during the last four weeks ending on Aug. 4. Those new listings, matched with a growing share of stale listings more than 30 days old, have bolstered inventory to 3.4 months of supply at the current sales pace.
And of those listings, 7.2 percent experienced a price drop, further signaling the movement from a sellers’ market to a balanced market.