Homebuyers Gain Momentum as Mortgage Rates Dip

Prospective homebuyers have been holding off making a purchase due to relatively elevated mortgage rates and home prices, but a recent drop in rates is improving affordability. Mortgage rates fell from 7.08% in late May to 6.67% at the start of July, according to real estate marketing platform Redfin. The current rate is the lowest recorded since early April. For someone with a $3,000 monthly budget, the decline increases purchasing power by $16,000, meaning that a buyer with that budget could now afford a $455,000 home, compared with one priced at $439,000 just five weeks ago.

Mortgage rates are still twice as high as they were in 2020 and 2021 during the pandemic homebuying boom. But for homebuyers who have been waiting months for rates to come down, the increase in purchasing power is notable. 

“Homebuyers have a window of opportunity today–and it could be short,” said Redfin Chief Economist Daryl Fairweather. “We expect mortgage rates to remain in the high-6% or low-7% range for the rest of the year, as the Fed has made it clear it doesn’t plan to cut interest rates.