Lower mortgage rates in recent months have led to greater affordability for potential home buyers, and this could lead to an extra competitive autumn of 2024.
That is according to a Zillow Report released Thursday in which the Seattle-based real estate company said “lower mortgage rates and rising inventories present homebuyers with an opportunity at an unusual time of year.”
Zillow noted that the average monthly mortgage payment in the U.S. had fallen by more than $100 in August from its peak in May. On a monthly basis, the average payment fell 3.4% to $1,827 in August. That figure does not include taxes or insurance, and assumes a buyer has made a 20% down payment with a mortgage interest rate of 6.5%.
“Late summer could be an opportunity for buyers who have been waiting in the wings for a monthly mortgage payment they can qualify for,” Zillow chief economist Skylar Olsen said in a statement.
“Buyers have more options to choose from for two reasons. First, it is easier to qualify for more homes on the market now that mortgage rates are lower. In addition, more inventory becomes available – enough to increase the bargaining power of buyers. Attractive properties in hot markets are still selling quickly, but some metro areas – or neighborhoods within them – have swung further in favor of buyers.”
Zillow reported that nationwide active inventory rose 22% year over year in August, although it remained 31% lower than the pre-pandemic level of August 2019. New listings, meanwhile, grew slightly month-over-year, but were 21 % lower than the same month in 2019.
Inventory growth has slowed, the company noted, but with approximately 1.18 million homes on the market, buyers have the most properties to choose from as of September 2020.
The share of offers with a price reduction will also certainly increase competition between buyers. This share fell slightly in August, but remains at around 25%. Additionally, Zillow reported that “competition is fierce for attractive listings, with more than a third of homes selling above asking price.”
Homes are also selling faster compared to pre-pandemic days. A typical home sold in August took 20 days to go under contract, up from 18 days in July, but down from 26 days in August 2019.
Realtor.com also reported this week that the fall season could be favorable for buyers. The advertising portals said that the week of September 29 to October 5 is expected to be the week of September 29 to October 5 “best time to buy” this year. Buyers could have up to 37% more inventory to choose from compared to the beginning of the year, and they could save at least $14,000 on the average-priced home compared to peak summer prices.
More homes are being offered for sale and affordability rates are improving, but this is not translating into more deals. Redfin reported last week that pending sales fell 8.4% for the 12 months ending in August, the biggest year-over-year decline in almost a year.
Importantly, Zillow also notes that mortgage rates — which have crept to 6.42% on a 30-year conforming loan, according to Thursday HousingWire‘s Mortgage Interest Center – do not affect buyers and sellers in the same way.
“Lower rates could slow or delay a normal fall cooling off period, as at this time buyers are more likely to be motivated by lower rates than sellers,” Zillow explains.
