Purchasing power has increased $7,500 in the last week alone, with rates falling to 6.3% on a weak August jobs report.
The daily average mortgage rate dropped to 6.29% on September 5, the lowest level in 11 months. That means a homebuyer on a $3,000 monthly budget has gained $7,500 since one week ago, when the average rate was roughly 6.5%.
A buyer on that budget can afford a $468,000 home with today’s mortgage rate, compared to the $460,500 home they could have bought with a 6.5% rate. But even last week’s 6.5% rate was a 10-month low; comparing to the average rate three months ago provides a sharper contrast. With a 6.9% rate, the average on June 5, a buyer on a $3,000 monthly budget could have bought a $446,000 home. That means a buyer on that budget has gained $22,000 in purchasing power over that short period.
To look at affordability another way, the monthly mortgage payment on the median-priced U.S. home, which goes for roughly $444,000, is $2,481 with today’s average rate. Three months ago, when rates were at 6.9%, the monthly payment would have been $2,624, about $150 more.
Mortgage rates fell sharply on September 5 following a weak August jobs report. The report showed fewer jobs created than expected, the highest unemployment rate since October 2021, and a labor market that’s at risk of recession. That all but guarantees the Fed will cut interest rates at its September 17 meeting, and that’s what is sending mortgage rates down today.
“My message to homebuyers and refinancers: This is what you’ve been waiting for,” said Chen Zhao, Redfin’s head of economics research. “If you’re serious about locking in a mortgage rate, do it now. The mortgage market is already pricing in the Fed’s expected interest-rate cut, and rates are unlikely to fall more. There have been very few opportunities to lock in a rate as low as 6.3% in the last three years–and now buyers have one.”
Another reason for house hunters to jump in now: There are hundreds of thousands more home sellers than buyers in the market, allowing buyers to negotiate prices down and get concessions in some cases.
The drop in rates is good news for home sellers, too. Even though there are many more home sellers than buyers, new listings have lost steam in recent weeks, meaning fresh listings are scarce. On-the-fence sellers should consider listing now, while falling rates are piquing the interest of buyers. And sellers who have had their home sitting on the market for weeks or months, consider upping your marketing efforts or even dropping your price to attract new buyers.
