Homebuyers on a $3,000 Monthly Budget Have Gained $40,000 in Purchasing Power Since Mortgage Rates Peaked Last Fall
30 January 2024 - 12:00AM
Business Wire
Redfin reports buyers can afford a more
expensive home now that mortgage rates have dropped to 6.7%, down
from nearly 8% in October
(NASDAQ: RDFN) — A homebuyer on a $3,000 monthly budget has
gained nearly $40,000 in purchasing power since mortgage rates
peaked this past fall, according to a new report from Redfin
(redfin.com), the technology-powered real estate brokerage. A
$3,000 monthly budget will buy a $453,000 home with a 6.7% mortgage
rate, roughly this week's average. That's compared to the $416,000
home the same buyer could have purchased in October with an average
rate of 7.8%.
To look at affordability from another perspective, the monthly
mortgage payment on the typical U.S. home, which costs roughly
$363,000, is $2,545 with a 6.7% rate. The monthly payment was
nearly $200 higher— $2,713— when rates were at 7.8%.
Homebuyers are getting some relief in 2024 as mortgage rates
come down from the two-decade high they hit this past October.
Weekly average rates dipped into the 6.6% range by the end of 2023,
and ticked up slightly to 6.7% this week. While that’s double the
record-low 3% rates buyers scored during the pandemic, Redfin
agents report that buyers have come to terms with the 6% range— but
they were more hesitant when they were approaching 8%.
“Bidding wars are picking up as mortgage rates decline and
inventory stays low. I’ve seen a few homes get 15-plus offers
recently, and one got more than 30,” said Shoshana Godwin, a Redfin
Premier agent in Seattle. “Late last year, many listings sat on the
market as buyers sat on the sidelines, hoping for rates to drop.
Now, buyers are snapping up homes because even though rates haven’t
plummeted, people are realizing that the longer they wait to buy a
home, the more competition they’re likely to face.”
Mortgage rates likely to stay in the 6’s for the foreseeable
future
Redfin economists predict mortgage rates will end the year lower
than they started, but the path is likely to be bumpy. Redfin is
keeping an eye on next week’s Fed meeting to provide more clues on
how soon they will cut interest rates: It could be as soon as
March, but it’s likely to be later. Mortgage rates should come down
a little— but not a lot— when interest rates are cut.
“My advice to serious house hunters: Trying to time the market
around mortgage rates is probably a waste of energy, as
affordability is unlikely to change meaningfully in the next
several months,” said Redfin Chief Economist Daryl Fairweather.
“Instead, buyers should consider their own personal and financial
circumstances: What matters most is whether the home meets your
needs long term and whether you can afford it. Timing the market
mattered in 2021, when we were in a golden window of record-low
rates— but that window is closed.”
To view the full report please visit:
https://www.redfin.com/news/purchasing-power-improves
About Redfin
Redfin (www.redfin.com) is a technology-powered real estate
company. We help people find a place to live with brokerage,
rentals, lending, title insurance, and renovations services. We
also run the country's #1 real estate brokerage site. Our
home-buying customers see homes first with same day tours, and our
lending and title services help them close quickly. Customers
selling a home in certain markets can have our renovations crew fix
up their home to sell for top dollar. Our rentals business empowers
millions nationwide to find apartments and houses for rent.
Customers who buy and sell with Redfin pay a 1% listing fee,
subject to minimums, less than half of what brokerages commonly
charge. Since launching in 2006, we've saved customers more than
$1.5 billion in commissions. We serve more than 100 markets across
the U.S. and Canada and employ over 4,000 people.
For more information or to contact a local Redfin real estate
agent, visit www.redfin.com. To learn about housing market trends
and download data, visit the Redfin Data Center. To be added to
Redfin's press release distribution list, email press@redfin.com.
To view Redfin's press center, click here.
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version on businesswire.com: https://www.businesswire.com/news/home/20240129925633/en/
Redfin Journalist Services: Ally Braun 206-588-6863
press@redfin.com
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