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By Omar Mohammed
Reporter, Economy & Finance
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A decline in mortgage rates and a drop in house prices is giving buyers a potential path to securing path to homeownership after months where the cost of home loans and expensive houses made purchasing property beyond the reach of a lot of Americans.
Mortgage rates fell to their lowest state in more than a year, according to Freddie Mac, averaging about 6.50 percent for the week ending August 8. Meanwhile, prices came down by $6,000 from their July high to a median sale cost of close to $390,000, real estate platform Redfin revealed.
"While that's a typical seasonal decline, the year-over-year increase of 3.2 [percent] is the smallest in nine months, indicating that price growth has eased slightly," Redfin's Dana Anderson pointed out.
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The shift has encouraged an uptick in mortgage applications. Requests for home loans went up nearly 7 percent in early August amid decelerating rates, according to the Mortgage Bankers Association (MBA).
Redfin's index that tracks buyer demand is improving too, the platform said.
"Redfin's Homebuyer Demand Index–a measure of requests for tours and other buying services from Redfin agents–is down 13 [percent] year over year, but that's the smallest decline in three months," Anderson noted.
Agents have noticed rising activity during showings as buyers see glimpses of opportunities in the housing market.
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"Many of the buyers I'm working with are excited because they've been casually house hunting for a year, waiting for rates to come down before they make an offer. Now a lot of those buyers want to get in now, before rates get too low and cause more competition," Redfin Premier Agent Shoshana Godwin said in a release. "One of my listings, which went on the market last week, had over 100 parties come through and received nine offers."
MBA noted last week that the 30-year fixed rate came in at 6.55 percent for the week ending August 2, sparking a jump in home loan applications.
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"Mortgage rates decreased across the board last week and mortgage application volume reached its highest level since January of this year," Joel Kan, MBA's vice president and deputy chief economist, said in a statement.
Kan went on to say that a cooling job market and expectations that borrowing costs are about to come down due to the Federal Reserve potentially cutting rates next month contributed to the drop in mortgage rates.
"As a result of lower rates, refinance applications increased across all loan types, particularly for [Veterans Affairs] loans, and were almost 60 percent higher than it was at this time last year and were at its highest level in two years," Kan said.
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