First-time homebuyers still have to compete for a small pool of houses.

Like your upstairs neighbor’s leaky bathtub, the Federal Reserve’s interest rate cuts are beginning to trickle down: Mortgage rates are gradually declining, and to take advantage, homeowners and prospective buyers submitted a wave of refinancing and loan applications last week, new data revealed yesterday.

Federally insured mortgage rates dipped below 6%—a “psychologically important” level, Mortgage Bankers Association VP Joel Kan said—while the the 30-year fixed-rate mortgage slid to 6.13%, down from a high of nearly 8% last year. According to the MBA:

• Refinancing applications shot up 20.3% last week compared to the week prior, and mortgage apps jumped 11%.
• Both hit their highest levels in more than two years.

But buying costs could still get worse. The median home price has spiked 50% over the past five years, so homeowners who locked in pandemic-era 3% mortgage rates likely don’t feel inclined to move. That’s partially why first-time homebuyers still have to compete for a small pool of houses for sale, which could push listing prices higher and seep into rental competition.

Slow roll: With wage growth expected to outrun inflation and mortgage rates projected to keep sliding with additional Fed cuts in the coming years, Goldman Sachs sees homebuying returning to “normal levels” of affordability by…2030.—ML

ByMolly LiebergallSeptember 26, 2024