In recent weeks, the average interest rate for 30-year fixed-rate mortgages has dropped below 7%. According to the financial magazine “Money,” the average rate briefly rose to 7.757% in early July, while the 15-year fixed-rate mortgage rate from Freddie Mac also increased to 6.25%.
Regarding the current real estate market, Sam Khater, the chief economist at Freddie Mac, stated, “Sales of new and existing homes are both declining, leading to an increase in active listings. We expect interest rates to moderately decrease in the latter half of the year. With the increase in inventory, the growth of home prices should slow down, which is a positive sign for potential home buyers.”
For homebuyers, high mortgage rates and rising home prices pose significant challenges. According to a survey by Realtor.com, around 30% of middle-aged homebuyers mentioned that their elderly parents offered support for purchasing a home, while another 30% had their parents discouraging them from taking out loans to buy a house.
During the COVID-19 pandemic, mortgage rates had dropped to historic lows of below 3% between 2020 and 2021. In 2022, with a significant rise in inflation rates, the 30-year mortgage rate soared from 3.22% in January to 7.08% by the end of October, with slight fluctuations afterward but consistently showing an upward trend.
According to themortgagereports website, the average 30-year fixed-rate mortgage was 3.10% in 2020, 2.96% in 2021, 5.34% in 2022, and 6.81% in 2023. People had expected mortgage rates to decrease in 2023, but contrary to expectations, the 30-year fixed-rate had reached around 7.8% at its peak.
In January 2024, the Federal Reserve decided to maintain the stability of the federal funds rate, considering that the inflation rate had approached their target level. Federal Reserve Chairman Jerome Powell testified before the House Financial Services Committee on Wednesday, July 10, stating that although more data is needed to confirm a cooling of inflation, due to the lag in data, there is no need to wait for inflation to fall to 2% (currently at 3%) before cutting rates. However, there is still not enough confidence in effectively curbing inflation.
Experts predict a possible rate cut this autumn. According to a recent survey by Reuters of a hundred economists, the Fed may implement the first rate cut in September and possibly more; any rate cut not implemented this year would be postponed to 2025. There is anticipation for a decrease in mortgage rates, with most forecasts indicating that the average rate for a 30-year mortgage in 2024 will be around 6%, with a potential further decrease in 2025.
According to Redfin, the average transaction price for U.S. homes is $398,000, showing a year-on-year increase of 4.9%. The average selling price in June was close to $410,000, marking the largest surge since October 2022.
Overall, home prices in California are on the rise. As reported by the “San Diego Union-Tribune,” in May of this year, the average selling price for resale single-family homes in San Diego County slightly exceeded $1 million, representing a 9% increase from the previous year and joining Orange County with a median single-family home price exceeding $1 million. Real estate analysts believe these price increases are inevitable due to the ongoing housing crisis and affordability challenges in California.
In June, the median home prices in the San Mateo and Santa Clara counties in the Bay Area had reached $2 million. The median home price in San Jose had surged nearly 15% from May to $1.5 million. The city saw a nearly 50% increase in new listings compared to the same period last year and an 18% increase in available homes for sale, indicating that more homeowners are looking to sell in one of California’s most expensive real estate markets.
Experts advise homebuyers that regardless of the current interest rates, it is essential to buy a home when your financial situation allows and you can afford the property you desire. A higher down payment can lower your interest rate, and purchasing a home when rates are low can reduce your loan interest. Homeowners can also refinance when rates significantly decrease to cut down on homebuying costs.