Lower mortgage rates and rising inventory are giving home buyers a window of opportunity at an unusual time of year. Lower mortgage rates have improved affordability significantly for home buyers, and competition among them could extend instead of fading away as is typical at this time of year. Mortgage rate declines have made buying a home “affordable” again at the national level (meaning monthly payments generally take less than one-third of median household income), assuming a buyer puts 20% down and before taxes and insurance are accounted for. Nationwide, the monthly payment on a typical home purchase has fallen by more than $100 since a peak in May. Lower rates also make it easier for buyers to qualify for a mortgage on more of the inventory listed in a given area, functionally increasing the choices available to them.

Beyond lower costs, a number of metrics are moving in buyers’ favor. The Zillow market heat index shifted from being in favor of sellers into neutral territory in July. For the past two years, sellers held their edge nationally until October. Homes are taking longer to sell than in recent history, but shorter than in pre-pandemic times. Homes that sold in August took 20 days to go pending, two more than in July, but about six days faster than at this time of year before the pandemic. And while inventory growth has slowed, nearly 1.18 million homes are on the market, more than any month since September 2020. Lower rates could stall or slow the cooldown in housing market activity that typically takes place this time of year, because right now buyers are more likely to be motivated by lower rates than sellers are.

Source: Zillow