Mortgage Rates Continue to Drop: Is Now a Good Time to Buy a House?

Key takeaways:

• Now is a prime opportunity to buy a home before market competition increases.

• Average mortgage rates have dropped to 6.12% as of September 16th, offering buyers significant increases in purchasing power compared to July.

• With more buyers re-entering the market, waiting could lead to higher prices.

• Housing inventory has surged by 20% compared to last year, providing plenty of choices for buyers.

As of Monday, September 16th, the average 30-year fixed mortgage rate dipped to 6.12%, the second-lowest rate in nearly two years. This marks a significant drop from April’s 7.5% peak and provides buyers with over $30,000 in added buying power since the beginning of July. Median monthly housing payments have fallen to $2,534, the lowest level since January.

With the Federal Reserve hinting at an interest rate cut on September 18th, we could see rates drop further. While a 0.25% cut seems likely, there is potential for a more aggressive 0.50% cut. The steady decline in mortgage rates since May is largely due to improving inflation, and rates are now more than 1% lower than they were a year ago.

Additionally, listings have increased by 20% year-over-year, meaning there’s more inventory available. If you’ve been waiting for the right time to buy, now may be your moment.

Is now a good time to buy a house?

If you’re ready, it’s an excellent time to buy before competition heats up. Waiting for mortgage rates to drop further could result in increased competition and rising prices as more buyers flood the market.

Buying now also maximizes your investment. Lower rates allow you to qualify for higher loan amounts or reduce monthly payments, helping you build equity faster.

However, the market has been unpredictable recently. Normally, higher rates push prices down, but that hasn’t been the case over the last two years. While inventory is rising, prices remain high, and some homes are selling fast while others linger. It’s important to stay prepared for any market surprises.

Renting isn’t a bad idea either

While purchasing a home can be a great investment, renting might be a better choice for some. Renting offers flexibility, especially in a market where prices are high and buying requires significant upfront costs. If you’re not ready to commit to the responsibilities of homeownership, renting allows you to save up for a future purchase, build a larger down payment, and avoid maintenance costs that come with owning a home.

Renting also gives you the chance to explore different neighborhoods or cities without being tied down. In some cases, monthly rental payments can be more affordable than mortgage payments, especially in areas where prices have soared. Plus, with today’s fluctuating market conditions, renting may give you the breathing room to wait for a more stable time to buy.

Will mortgage rates fall further in 2024?

Current mortgage rates reflect what investors expect the Fed to do. While rates may continue to trend down gradually, significant further drops are unlikely, as today’s rates have already factored in anticipated rate cuts.

How did we get here?

The past decade has seen a shortage of homes, which led to the housing boom of 2021-2022 as too many buyers chased too few properties. Record-low mortgage rates further fueled demand. Although construction has picked up since, prices have continued to rise as many homeowners with low pandemic-era rates chose not to sell, limiting inventory.

Today, even as more homes are listed, prices remain at record highs, and many potential buyers have stayed out of the market. The recent decline in mortgage rates, however, has renewed hope for those looking to buy.

Home sellers: Prepare for more competition

The drop in mortgage rates is bringing more buyers back into the market. Those who were waiting for rates to fall are now jumping back in, leading to increased competition for available listings.

Should you lock in your mortgage rate today?

If you’re financially ready, now is an excellent time to lock in a lower mortgage rate. Rates haven’t been this low in over a year, and lower rates allow you to qualify for more or enjoy reduced payments within your current budget.

All-cash buyers may also want to act now to avoid potential price hikes as competition rises and rates continue to fall.

Final thoughts

Whether you decide to buy now or rent for a while, it’s a good time to reassess your housing plans. If you’ve been hesitant due to high mortgage rates, now is the time to start your home search or consider securing a rental. Mortgage rates are trending down, and more inventory is hitting the market, but renting can provide the flexibility you need if you're not ready to buy just yet.

Contact Jean Prescott Studio today for expert guidance on your next move, whether it’s buying, renting, or designing your dream home!

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