SEATTLE — The median U.S. monthly housing payment was $2,558 during the four weeks ending September 8, nearly down to where it was at the start of the year and down 1.3% from a year earlier, according to a new report from the Redfin brokerage. That’s a small drop, but it’s the second-biggest decline since May 2020, when the housing market was stumbling before the pandemic-driven boom (the biggest decline since then was two weeks ago, when payments declined 1.6%).
Housing payments are falling because mortgage rates are falling. Weekly average mortgage rates and daily average rates have both dropped to their lowest level in over a year in anticipation of the Fed cutting interest rates. Housing payments would be falling further if not for stubbornly high home prices: The median U.S. home-sale price is $388,085, up 3.7% year over year and just a few thousand dollars shy of July’s all-time high. Home prices remain elevated despite slow sales partly due to limited inventory. The total number of homes for sale is down nearly 30% from pre-pandemic levels, and while it’s up 16.7% from a year ago, that’s the smallest increase in five months.
Declining housing payments haven’t yet translated to an uptick in sales; pending home sales are down 7.8% annually, the biggest decline in nearly a year (except the prior 4-week period).
“One of my buyers is under contract on a home, but he’s trying to hold off on closing until the end of the month in hopes that rates will come down and he can get more bang for his buck,” said David Palmer, a Redfin Premier agent in Seattle. “I’m also seeing people postponing until after the presidential election; buyers tend to be more careful about major financial decisions around a consequential election. The people who are buying are doing so because of major life changes, like a divorce or new job.”
We have seen an uptick in early-stage indicators of demand, so dynamics might be changing. Redfin’s Homebuyer Demand Index – a measure of tours and other buying services from Redfin agents – is near its highest level since May, and mortgage-purchase applications are up 2% week over week.
The August CPI report released yesterday was slightly hotter than expected, nudging the Fed toward a 25 bps rate cut at its meeting next week. However, inflation remains cool enough that the Fed could still surprise with a 50 bps cut to get ahead of further weakness in the labor market or simply project the possibility of larger cuts down the road. Mortgage rates, having priced in an aggressive cutting cycle into 2025, are unlikely to move much until we hear from the Fed.
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