Collins: What do lower mortgage rates mean for buyers?

Mortgage rates for a conventional 30-year mortgage have dropped to the mid-6% range this month after topping out in May at more than 7.5%.

Depending on a buyer’s credit score and downpayment, they may be able to buy down points to get an even lower rate. It appears this downward trend could continue. According to HousingWire, “Mortgage rates, which generally move in tandem with the 10-year Treasury yield, are expected to drop even further in the coming months as the Federal Reserve is widely anticipated to cut rates by 25 to 50 basis points in September.”

In addition to better rates, buyers also have more inventory to choose from. According to MLS Listings Inc., the inventory of single-family homes has risen in Santa Clara County from 618 last July to 830 this year.

“With the increased inventory and higher rates, the market has slowed somewhat,” Michelle Perry, 2024 president of the Santa Clara County Association of Realtors, said. “Competition has been on the lighter side and even saw sellers entertain some price reductions, but that still couldn’t help the first-time homebuyer who wanted to purchase my client’s listing at a reduced price of $750,000. He was only approved for $700,000 at 7.5%, but when the rates dropped, he was able to lock in a 6.5% rate and make his dream a reality. That lower rate equated to about $450 per month in savings and he became a first-generation homebuyer.”

The late summer and early fall market could be quite robust this year. While inventory has increased compared to last year, it remains low relative to the pent-up buyer demand. Lower rates could potentially unlock additional inventory as homeowners with sub-5% mortgage rates consider relocating.

This shift will likely draw even more buyers into the market, reaffirming that owning real estate continues to be one of the best long-term investments you can make.

San José Spotlight columnist Neil Collins is CEO of the Santa Clara County Association of Realtors, a trade association representing more than 6,000 real estate professionals in Santa Clara County and surrounding areas. Contact Neil at [email protected].