Mortgage Rates and Home Sales Down as Buyers Wait for the Right Moment

Even with mortgage rates ticking down slightly, home buyers are still on the sidelines. Many are waiting to see if rates will fall even further, which is a strong possibility based on economic data.

The latest Freddie Mac survey of mortgage rates was released on Thursday. Following the recent Federal Reserve rate cut, the average benchmark 30-year fixed mortgage fell from 6.20% to 6.09%. A 15-year fixed loan is currently averaging 5.15%, down from 5.27% a week ago.

“While mortgage rates do not directly follow moves by the Federal Reserve, this first cut in over four years will have an impact on the housing market,” said Freddie Mac’s chief economist, Sam Khater. “Declining mortgage rates over the last several weeks indicate this cut was mostly baked in, but rates will likely fall further, sparking more housing activity.”

While the average mortgage rate has come down since the highs of last year, sales of previously occupied homes have been disappointing. In August, sales declined 2.5% compared to July and dropped 4.2% versus August 2023. Seasonally adjusted annualized sales came in at 3.86 million homes, less than the 3.9 million expected by analysts.

According to the National Association of Realtors, the median sales home price rose to $416,700, up 3.1% from last year. Meanwhile, the supply of homes has also increased, and so has the amount of time they remain on the market. Current data shows 1.35 million homes for sale, which is 0.7% higher than July and 22.7% higher than August last year. Listed homes stayed on the market an average of 26 days in August, higher than the average 24 days in July.

“Although homebuyers had more for-sale homes to choose from and increased buying power from easing mortgage rates, it seems that many are waiting for additional improvements,” says Realtor.com Chief Economist Danielle Hale. “So far, those buyers who waited may be glad that they did.”

All these signs indicate that the housing market is beginning to favor buyers. As mortgage rates continue to fall, homebuyers can more easily qualify for a mortgage and obtain an affordable payment. In addition, homeowners become more flexible on the sales price the longer they have to wait to sell their properties, which potentially gives a buyer an advantage during negotiations.