In the wake of the Federal Reserve’s cut in the federal funds rate, mortgage rates also are continuing their downward trend. Freddie Mac reports the 30-year fixed-rate mortgage (FRM) averaged 6.08% this week.
“Although this week’s decline was slight, the 30-year fixed-rate mortgage trended down to its lowest level in two years,” said Sam Khater, Freddie Mac’s chief economist.
“Given the downward trajectory of rates, refinance activity continues to pick up, creating opportunities for many homeowners to trim their monthly mortgage payment. Meanwhile, many looking to purchase a home are playing the waiting game to see if rates decrease further as additional economic data is released over the next several weeks.”
The recent decline in mortgage rates appears to be luring buyers back to the housing market. The National Association of Realtors (NAR) reports pending home sales rose 0.6% in August following months of declines.
Pending home sales track home sales contracts that have been signed but not yet closed.
‘Modest improvement in affordability’
“A slight upward turn reflects a modest improvement in housing affordability, primarily because mortgage rates descended to 6.5% in August,” said NAR Chief Economist Lawrence Yun. “However, contract signings remain near cyclical lows even as home prices keep marching to new record highs.”
In August, sales were lower in the Northeast, falling 4.6% from July. But sales were up in the Midwest, South and West.
Yun points out that contract signings increase in some of the most affordable markets as well as in some of the most expensive, a trend he attributes to falling mortgage rates.