The latest adjustment marks the lowest a typical payment has been in six months — and, with a mere 1 percent month-over-month increase, the smallest uptick in five years, according to a Redfin analysis.
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A typical monthly mortgage payment is now $2,588 — a nearly $250 dip from an all-time high in April, according to an analysis by Redfin released Thursday.
The latest adjustment marks the lowest a typical monthly mortgage payment has been in six months — and, with a mere 1 percent month-over-month increase, the smallest uptick in five years, according to payments tallied by Redfin during a four-week period ending Aug. 11.
Coupled with declining mortgage rates, the reduced payments should convince some prospective buyers to return to the market, if they haven’t already, Redfin Premier agent Brynn Rea said in a statement. On Wednesday, mortgage-purchase applications rose 3 percent week over week on a seasonally adjusted basis, according to the Mortgage Bankers Association.
“I expected more buyers to come out once mortgage rates started falling,” Rea said. “Although there’s been some increase in house hunting, it hasn’t been substantial. Budgets are still a primary concern for buyers, and homes remain quite expensive for many.
The total number of homes for sale in the U.S. increased nearly 20 percent year over year with a large portion of inventory sitting on the market longer, giving buyers more room to negotiate. Additionally, under 30 percent of homes are selling above the asking price, down from 35 percent the previous year.
Despite an improvement in costs and inventory, pending home sales have not picked up, falling 5.1 percent year over year to 82,160, representing the largest drop since November with the exception of last month’s 6.2 percent decline.
Several factors are contributing to buyer hesitation, including the fact that home prices, while lower than their July peak, are still near record highs. Furthermore, some potential buyers are holding off due to uncertainty about the economy surrounding the upcoming presidential election.
Buyers are uncertain whether mortgage rates will continue to decline or if a recession in the U.S. looms ahead.
According to Redfin’s recent CPI report, inflation is continuing to ease, reinforcing expectations that Fed may begin cutting interest rates in September although the extent of the cuts is uncertain. Markets have already priced in expectations for significant rate reductions.
If the Fed does not meet these expectations, rates could increase modestly. If cuts are as aggressive as anticipated, mortgage rates could fall further. If lower rates boost demand, home prices may rise.
Redfin’s Homebuyer Demand Index, a metric that tracks requests for tours and other services from Redfin agents, is down 10 percent year-over-year, the smallest decline since April.
“A lot of buyers are waiting to see if mortgage rates will drop further, especially if the Fed cuts interest rates, and they’re also keeping an eye on the economy and the upcoming election,” Rea said.
Email Richelle Hammiel