Housing payments made their sharpest drop in more than four years during the week leading up to the Federal Reserve’s highly anticipated rate cut. While affordability is rising, the impact of the Fed's decision on mortgage rates and the housing market has yet to pan out.
Ahead of the Fed cutting its benchmark rate by 50 basis points Wednesday, mortgage rates fell to their lowest level in 20 months, providing home buyers some much-needed payment relief.
The median U.S. housing payment was $2,534 during the four weeks ending September 15, down 2.7% from a year earlier – the biggest decline since May 2020, according to a new report from Redfin.
The 30-year FRM averaged 6.09% as of September 19, per Freddie Mac’s latest Primary Mortgage Market Survey. That’s down 11 basis points from last week, and more than 100 basis points less year over year. A year ago at this time, the 30-year FRM averaged 7.19%.
“Mortgage rates continued declining towards the six percent mark, reviving purchase and refinance demand for many consumers,” Freddie Mac’s Chief Economist Sam Khater said. “While mortgage rates do not directly follow moves by the Federal Reserve, this first cut in over four years will have an impact on the housing market. Declining mortgage rates over the last several weeks indicate this cut was mostly baked in, but we expect rates to fall further, sparking more housing activity.”
Signs indicative of renewed interest from buyers include a 5% increase in home purchase applications the week ending September 13. However, the number of home purchases that make it to the closing table has yet to catch up.
Pending home sales were down 6.9% YOY during the four weeks ending September 15.
Fannie Mae's Economic and Strategic Research (ESR) Group no longer expects home sales to pick up meaningfully by the end of 2024, with the annual pace now forecast to be the slowest since 1995, strategists said in their September 2024 commentary.
