As fall sets in, the U.S. housing market is showing signs of stability rather than slowdown. Realtor.com’s September report points to flat national prices, steady inventory growth, and longer
Mortgage Rates Plummet, Yet Housing Affordability Lags – Here’s Why
Dated: September 24 2024
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Interest rates have dropped significantly since last year. In October 2023, the average mortgage interest rate for a 30-year fixed mortgage peaked at 7.79%, according to Freddie Mac data cited by Investopedia. As of last month, mortgage rates fell to 6.35%, reports Dr. Clare Knapp, Housing Economist with the Austin Board of Realtors and Unlock MLS. That’s a 150 basis point drop from last year’s 20-year high. Currently, the U.S. Federal Reserve has cut short-term rates by 50 basis points, pushing mortgage rates closer to the 6% mark. While mortgage rates aren't directly set by the Fed, they are influenced by the 10-year Treasury yield, as explained in this Bankrate article.
Why Aren't Homes Selling Faster?
Two main factors are slowing sales despite lower rates:
Homeowners’ low mortgage rates: A large percentage of current homeowners have mortgage rates below 6%, with more than half below 4%. Moving up to a larger home would mean giving up their lower rate for today’s higher average, resulting in potentially $500 more per month on a $450,000 home. For more, see the Unlock MLS article.
High home prices: Although prices have dipped, they remain much higher than in 2019. Buyers who purchased an Austin, Texas area home before the pandemic-driven price surge did so with mortgage rates around 3.5% or lower. In 2019, the median price in our area was $315,000, compared to today’s mid-$400s. This combination of higher mortgage rates and elevated prices means a similar home could now cost up to $1,500 more per month. Again, check out the Unlock MLS article for context.
These factors make housing less affordable for both repeat and first-time buyers.
For Buyers
If you're in the market, be practical and strategic:
- Determine how much you can afford monthly.
- Work with a knowledgeable realtor who can connect you to the best loan products and builders offering incentives, such as closing cost contributions or mortgage rate buy-downs.
- Prioritize the layout when purchasing new construction, and hold off on luxury upgrades, which can be added later with zero-interest financing.
- If considering a resale, a fixer-upper might be more budget-friendly.
For Sellers
In a competitive, high-inventory market, sellers should focus on pricing strategies and curb appeal. Decluttering, showing readiness, and offering buyer incentives will help your home stand out. For more tips, refer to my earlier blogs.
Looking Ahead
If mortgage rates continue to fall, more buyers will enter the market, potentially driving prices up. However, this increase in demand will likely be met with a rise in inventory, balancing the effect. Expect home prices to remain steady with modest growth in the near term.
Need Help?
Contact one of our NuView Realty Group agents at 512-668-1910 or email us at kmba@kenesellsatx.com.
Kene Mba
I became a real estate salesperson after almost 15 years working in the corporate world for a major energy company. I had done some real estate investing mostly in residential single family and multi-....
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