Redfin Reports Falling Mortgage Rates Mean Housing Payments Are Now More Affordable Than a Year Ago Despite Higher Prices

Falling mortgage rates have pushed the median U.S. housing payment down near its lowest level since January, but pending home sales have yet to improve. Many would-be buyers are hoping rates fall further, and others are waiting for clarity around the new NAR rules

(NASDAQ: RDFN) — The median U.S. monthly housing payment was $2,558 during the four weeks ending September 8, nearly down 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 (redfin.com), the technology-powered real estate brokerage. That’s a small drop, but it’s the second-biggest decline since May 2020, when the housing market was stumbling before the pandemic-driven boom (the biggest decline since then was two weeks ago, when payments declined 1.6%).

Housing payments are falling because mortgage rates are falling. Weekly average mortgage rates and daily average rates have both dropped to their lowest level in over a year in anticipation of the Fed cutting interest rates. Housing payments would be falling further if not for stubbornly high home prices: 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 prices remain elevated despite slow sales partly due to limited inventory. The total number of homes for sale is down nearly 30% from pre-pandemic levels, and while it’s up 16.7% from a year ago, that’s the smallest increase in five months.

Declining housing payments haven’t yet translated to an uptick in sales; pending home sales are down 7.8% annually, the biggest decline in nearly a year (except the prior 4-week period). That’s partly due to high home prices, but other factors are at play, too. Redfin agents report that some would-be buyers are holding off because they’re confused about the new NAR rules, which went into effect on August 17. Other house hunters are hoping mortgage rates will come down further before they buy.

“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.”

We have seen an uptick in early-stage indicators of demand, so dynamics might be changing. Redfin’s Homebuyer Demand Index–a measure of tours and other buying services from Redfin agents–is near its highest level since May, and mortgage-purchase applications are up 2% week over week.

The August CPI report released yesterday was slightly hotter than expected, nudging the Fed toward a 25 bps rate cut at its meeting next week. 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. Mortgage rates, having priced in an aggressive cutting cycle into 2025, are unlikely to move much until we hear from the Fed.

For Redfin economists’ takes on the housing market, please visit Redfin’s “From Our Economists” page.

Key housing-market data

To view the full report, including charts, please visit: https://www.redfin.com/news/housing-market-update-housing-payments-becoming-more-affordable

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 run the country's #1 real estate brokerage site. Our customers can save thousands in fees while working with a top agent. Our home-buying customers see homes first with on-demand tours, and our lending and title services help them close quickly. Customers selling a home can have our renovations crew fix it up to sell for top dollar. Our rentals business empowers millions nationwide to find apartments and houses for rent. Since launching in 2006, we've saved customers more than $1.6 billion in commissions. We serve more than 100 markets across the U.S. and Canada and employ over 4,000 people.

Redfin’s subsidiaries and affiliated brands include: Bay Equity Home Loans®, Rent.™, Apartment Guide®, Title Forward® and WalkScore®.

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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