Mortgage Rates Drop Near 3-Year Low, Opening Door For Homebuyers–But Few Are Walking Through

A homebuyer on a $3,000 budget has gained $26,000 since last year as mortgage rates drop to the low-6% range. But pending home sales are still slipping. 

The daily average mortgage rate dropped to 6.17% this week, near the lowest level in three years. Lower mortgage rates are curbing growth in monthly mortgage payments; the typical U.S. monthly payment is $2,556, up 0.6% year over year, the smallest increase in three months. 

A homebuyer on a $3,000 budget can afford a $473,750 home at today’s mortgage rate, compared to the $447,750 home they could have bought one year ago, when rates were around 6.85%. Compared to one month ago, buyers have gained $9,500 in purchasing power; they could have bought a $464,250 home with rates sitting near 6.4%. 

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Despite more purchasing power, would-be buyers remain on the sidelines

Pending U.S. home sales fell 0.7% year over year during the four weeks ending October 19, the third straight week of declines. 

There are a few reasons buyers are wary. One, the forces pushing mortgage rates down–economic uncertainty and political tensions–are also making some house hunters feel uneasy about making a major purchase. Buyers are also facing stubbornly high prices, with the median home-sale price up 2% year over year, the biggest increase in six months. 

The selling side is holding up better. New listings rose 4.6%, the biggest increase in nearly five months, as sellers hope buyers pounce on lower rates. Nationwide, there are half a million more home sellers than buyers.

The big gap between home sellers and buyers, along with the improvement in purchasing power, make it a good time for buyers who can afford today’s high housing costs to jump into the market. Redfin agents in many parts of the country report that it feels like a buyer’s market, with sellers open to lowering the sale price and providing concessions. 

“Buyers are scoring deals, especially those who can pay all cash and/or those who are open to new construction,” said Amanda Peterson, a Redfin Premier agent in Dallas. “One recent all-cash buyer paid $500,000 for a condo that was appraised at $685,000–and the seller agreed to pay upfront for six months of pricey HOA dues. And builders are offering steep discounts on new homes, especially in areas where they already have a lot of inventory and are still actively building. Builders are dropping prices, giving up to $20,000 in concessions, throwing in appliances, and buying down mortgage rates, sometimes to below 4%.”

For Redfin economists’ takes on the housing market, please visit Redfin’s “From Our Economists” page. 

Leading indicators

Key housing-market data

Refer to our metrics definition page for explanations of all the metrics used in this report.

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