According to recent surveys by real estate software platform HomeLight, mortgage rates would need to drop by at least half a percentage point to attract back home buyers. This was the popular sentiment among 63% of top lenders surveyed across the nation, who agree that the rate should be 5.75% or lower. Real estate agents nationwide also agree with this as per a separate HomeLight survey.
As of now, the average 30-year mortgage rate hovers around 6.30%, which is down from a peak of 7% in January but still slightly higher compared to a few weeks ago, says Freddie Mac. Despite expectations that the Federal Reserve would lower its benchmark rate, causing mortgage rates to fall through August, rates saw a slight increase after the Fed executed the anticipated cut on September 17.
In recent years, the housing market has plateaued, with a limited influx of new inventory and high home prices and mortgage rates discouraging potential buyers. While rates have experienced some reduction, it remains uncertain whether they will dip to a level capable of invigorating the housing market once more.
Redfin suggests that about 20% of homeowners have a mortgage rate of 6% or higher – the highest since 2015. The real estate company also reveals that over half of homeowners serve a mortgage rate below 4%. If mortgage rates were to drop below 6%, this could tempt more homeowners to put their house up for sale, as per HomeLight's report and this could in turn lead to a swift increase in home prices.
However, the challenge potential buyers now face is getting the timing right. According to Phil Crescenzo Jr., Southeast Division's vice president at Nation One Mortgage Corporation, although sellers are willing to make concessions because demand is low, lower rates could stimulate demand and start to hike prices again eventually, but not instantly.