This week, mortgage interest rates have seen a slight rise, with the 30-year fixed-rate mortgage rate increasing by three basis points to an average of 6.19%. Despite this minor increase, rates are still at a favorable level, being the lowest they have been in over two years. This is a significant improvement from the highs of almost 8% experienced in October 2023.
Lower interest rates are beneficial for home buyers as they allow budgets to stretch further. For instance, at a rate of 7.79%, a buyer could afford a $278,000 home with a monthly payment of $2,200. However, at the current rate of 6.19%, the same buyer can afford a $318,000 home, increasing their buying power by $40,000.
Although lower interest rates are advantageous, forecasters predict only a slight decrease in rates through the end of the year and into 2025. Despite this forecast, the current economic conditions suggest that the difference between the very low sixes and the high fives in interest rates might not have a significant impact for most buyers.
Moving on to inventory, there has been a notable increase in the number of homes for sale. In August 2024, the existing home inventory reached 1.35 million, the highest since fall 2020. This increase in inventory, coupled with slower home sales, could provide buyers with more leverage in the market.
Despite the rise in inventory, home prices have remained stubbornly high. While there have been slight month-over-month decreases, the median price of an existing home was $416,700 in August. This poses challenges in terms of affordability, especially when considering the impact of lower interest rates alongside increasing home prices.
It’s important to note that national-level data may not reflect the specific conditions in local housing markets. Variations in median list prices across different metro areas demonstrate the diverse nature of the housing market. Ultimately, individual homebuying decisions should be based on personal circumstances rather than broad market trends.