Redfin said buyers can afford a more expensive home since mortgage rates have dropped from nearly 8% in October.
SEATTLE – A homebuyer on a $3,000 monthly budget has gained nearly $40,000 in purchasing power since mortgage rates peaked this past fall, according to a new report from real-estate brokerage Redfin.
A $3,000 monthly budget will buy a $453,000 home with a 6.7% mortgage rate, roughly this week’s average. That’s compared to the $416,000 home the same buyer could have purchased in October with an average rate of 7.8%.
That is, the monthly mortgage payment on a typical U.S. home (which, on average, costs $363,000) is is $2,545 with a 6.7% rate. That monthly payment was nearly $200 higher – $2,713 – when rates were at 7.8%.
Freddie Mae reported the 30-year fixed-rate mortgage averaged 6.69% as of Jan. 25. Redfin said bidding wars are picking up with the lower rates and tight inventory.
“While that’s double the record-low 3% rates buyers scored during the pandemic, Redfin agents report that buyers have come to terms with the 6% range – but they were more hesitant when they were approaching 8%,” Redfin said.
Mortgage rates likely to stay in the 6% range for the near future
Redfin economists said rates will end the year lower than they started, but the path is likely to be bumpy. Rate cuts could be as soon as March but will more likely be later.
“My advice to serious house hunters: Trying to time the market around mortgage rates is probably a waste of energy, as affordability is unlikely to change meaningfully in the next several months,” said Redfin Chief Economist Daryl Fairweather.
“Instead, buyers should consider their own personal and financial circumstances: What matters most is whether the home meets your needs long term and whether you can afford it. Timing the market mattered in 2021, when we were in a golden window of record-low rates – but that window is closed.”
© 2024 Florida Realtors®
You May Also Like
Is It Time to Refinance Your Mortgage?
Average Long-Term Mortgage Rate Rises to 6.69%
Fannie Mae Offers New Low-Income Purchase Credit
