High home prices are being partially offset by the lowest housing payments since January – a byproduct of falling mortgage rates.
The median U.S. monthly housing payment was $2,558 during the four weeks ending September 8, close to where it was at the start of the year and down 1.3% from a year earlier, according to a new report from Redfin.
That marks the second-largest decline in more than four years, just behind the 1.6% drop reported two weeks earlier.
Mortgage rates have fallen to their lowest level in over a year in anticipation of the Federal Reserve cutting interest rates at its Sept. 17-18 meeting.
Chen Zhao, who leads the economics team at Redfin, expects Wednesday's slightly firmer-than-expected inflation report to make a 25-bps cut an easy choice for the Fed.
“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,” Zhao said. “Mortgage rates, having priced in an aggressive cutting cycle into 2025, are unlikely to move much until we hear from the Fed.”
If not for stubbornly high home prices, housing payments would be falling further. 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 sales reached record lows through August, with pending sales dropping 8.4% year over year in the four weeks ending September 1.
Would-be buyers are holding off for a variety of reasons; uncertainty about the new rules dictating agent commission, the presidential election, and a lack of inventory.
“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.”
