Recently, 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 rose to 6.25%.
In response to the current real estate market, Sam Khater, Chief Economist at Freddie Mac, stated, “Both new home and existing home sales have been declining, leading to an increase in active listings. We anticipate that interest rates will moderate in the second half of the year. With the increase in inventory, home price growth is expected to slow down, which is a positive sign for prospective homebuyers.”
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 indicated that their elderly family members supported them in their home purchase, while another 30% had parents who opposed taking out loans to buy a house.
During the COVID pandemic, mortgage rates had dropped to historic lows below 3% between 2020 and 2021. In 2022, with a significant increase in inflation, the 30-year mortgage rates soared from 3.22% in January to 7.08% by the end of October, with a slight decrease afterward but continuing 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. While many had anticipated a decrease in mortgage rates in 2023, the rates did not align with expectations, with the 30-year fixed-rate reaching highs of around 7.8%.
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. Federal Reserve Chair Jerome Powell, during his testimony before the House Financial Services Committee on Wednesday, July 10, mentioned that although more data is needed to confirm the easing of inflation, due to data lags, interest rate cuts wouldn’t necessarily wait until inflation drops to 2% (currently at 3%). However, there still isn’t enough confidence to effectively curb inflation.
Experts predict that a rate cut could happen this autumn. A recent survey by Reuters of a hundred economists suggests that the Federal Reserve may implement the first rate cut in September this year, possibly more than once. Rate cuts that were not implemented this year could be postponed until 2025. People are hopeful for a decrease in mortgage rates, with most projections indicating that the average rate for a 30-year mortgage in 2024 may be around 6%, potentially further declining in 2025.
According to Redfin reports, the average selling price of homes in the United States is $398,000, a 4.9% year-on-year increase. The average selling price in June was close to $410,000, marking the largest surge since October 2022.
In California, overall housing prices continue to rise. According to the San Diego Union-Tribune, the average resale price of single-family homes in San Diego County exceeded $1 million in May this year, a 9% increase from the previous year, making it another Southern California county, alongside Orange County, where the average price of single-family homes surpasses $1 million. Real estate analysts believe these hikes are inevitable due to the worsening housing crisis and affordability in California.
In June, the median home prices in San Mateo and Santa Clara counties in the Bay Area had reached $2 million. In San Jose, the median home price surged by nearly 15% from May, reaching $1.5 million. The city saw a nearly 50% increase in new listings and an 18% increase in homes for sale compared to the same period last year, 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 advisable to purchase a home when your financial situation allows and you can afford the home you desire. A higher down payment can lower your interest rate, and buying when rates are low can reduce your loan interest. Homeowners could also refinance when rates significantly drop to lower their home purchase costs.