The typical monthly housing payment just fell from an all-time high

Mortgage rates are hopefully coming back down to earth. So far daily mortgage rates have fallen to 6.81% and weekly rates to 6.77%, their lowest readings in months. For some homebuyers, it represents thousands of dollars in new purchasing power; for others, it’s pushing monthly mortgage payments down, according to Redfin.

The typical monthly housing payment was roughly $2,700 in the four weeks ending July 14, falling more than $100 from April’s all-time high. “That’s despite home prices sitting just about $100 shy of last week’s record high,” an analysis published today read.

In another bit of good news, supply continues to rise. New listings are 6.4% higher than last year, and the total number of listings is near its highest point in close to four years, at 977,230. It’s a sign the lock-in effect, which has kept sellers on the sidelines because nobody wants to lose a low mortgage rate, is lessening. (As of the fourth quarter of last year, about 87% of outstanding mortgage debt had a rate below 6%, according to Realtor.com’s analysis of data from the Federal Housing Finance Agency.) “More homeowners are selling because they’re tired of waiting for rates to drop significantly; it has been more than two years since they started rising from pandemic-era lows,” Redfin said.

But buyers have yet to react to the change. Pending home sales, by Redfin’s count, are down 5.6% from a year ago, the greatest decline in eight months. Redfin’s homebuyer demand index and mortgage purchase applications are down too. Maybe it’s because people are waiting for mortgage rates to fall further. After all, they’re still considerably higher than the pandemic-era lows, even if they’re lower than the more than two-decade high reached in October last year.

“Now that it’s looking increasingly likely the Fed will cut interest rates by the end of the year, some house hunters believe mortgage rates will fall more and are waiting for that to happen before they buy,” Chen Zhao, Redfin’s economic research lead, said.

Zhao continued: “But they may be waiting in vain; it’s unlikely mortgage rates will drop much lower in the next few months, as markets are already pricing in the expectation of a rate cut in September, followed by several more at the end of 2024 and into 2025.”

Where mortgage rates will end up isn’t certain, although the National Association of Realtors’ chief economist recently suggested that 6% would be a new reality, while Compass’s chief executive said that’s the magic number to fuel activity. But if mortgage rates stay above 6.5% through the rest of the year, a recovery in housing demand might not happen, according to Capital Economics. For its part, the research firm doesn’t see mortgage rates falling below 6.5% this year—it doesn’t even see them falling to 6% for another two years. Fannie Mae and the National Association of Realtors both predict mortgage rates will be 6.7% by the end of the year.

Either way, earlier this week, Zillow’s chief economist, Skylar Olsen, wrote that the housing market was beginning to look more like it did before the pandemic, after years of frenzy followed by a halt. And Capital Economics seemed to see it as a rebalancing of sorts. Plus, we know home price inflation is slowing and supply is increasing, so all things considered, it seems to be a more normal housing world than what we’ve experienced in the last four or so years. But that isn’t to say everything is all good; we’re still missing millions of homes, and home prices still rose substantially, while incomes haven’t kept up.