Mortgage rates, which are influenced by market expectations, have decreased over the past week due to anticipation that the Federal Reserve may cut rates as the economy slows.
The 30-year mortgage rate initially dropped after the Fed hinted at a possible rate cut in September on Wednesday and fell further following Friday's jobs report. As of Thursday, the average rate for a 30-year mortgage was 6.48%, the lowest since May 2023, according to data from Intercontinental Exchange.
On Monday, the 30-year fixed-rate mortgage declined further to 6.34%, the lowest level since April 2023, according to Mortgage News Daily, which surveys lenders daily.
“We could see additional declines in interest rates if economic data continues to support a weakening economy, but today's data didn’t provide further confirmation,” Ralph McLaughlin, a senior economist at Realtor.com, told MarketWatch. July’s rebound in the service sector countered recession concerns.
(Realtor.com is managed by News Corp subsidiary Move Inc., and MarketWatch is a division of Dow Jones, also a News Corp subsidiary.)
For many buyers, the drop in rates is a significant development, especially given the recent decline in housing affordability. In May, housing affordability fell 7% from the previous year, according to the Federal Reserve Bank of Atlanta's Home Ownership Affordability Monitor.
Purchasing a median-priced home of $383,000 in May would have required 44% of an annual salary of $81,000, which is deemed a financial strain by the Atlanta Fed.
To afford a home with a median listing price of about $440,000 in July comfortably, a buyer would need an annual income of $90,000, according to Realtor.com calculations. This assumes the buyer's monthly housing payment is about a third of their income, with monthly costs around $2,500, based on a 20% down payment, a 30-year rate of 6.3%, and including taxes and insurance.
“An economic downturn isn’t necessarily negative for buyers,” McLaughlin noted, referencing a 2023 survey of site visitors.
Approximately 36% of buyers indicated that a recession would make them somewhat more likely to purchase a home, with this figure rising to 42% among first-time buyers and 32% among repeat buyers.
