Windermere economist on mortgage rates: ‘Serious movement in right direction’
Aug 8, 2024, 5:30 PM | Updated: Oct 8, 2024, 10:51 am
Townhouses in Ballard are pictured as mortgage rates continue to fluctuate. (2019 photo: Sightline Institute Middle Homes Photo Library via Flickr)
(2019 photo: Sightline Institute Middle Homes Photo Library via Flickr)
There is hope for home buyers and some relief for homeowners as mortgage rates have sizably dropped from last year. Windermere Chief Economist Jeff Tucker told KIRO Newsradio Thursday there is “some serious movement in the right direction for buyers.”
According to Freddie Mac’s weekly survey of the mortgage markets, mortgage rates are seeing their lowest level in over a year, going from 7.79% to 6.47% on a typical 30-year mortgage. The Associated Press (AP) reported the rate fell from 6.73% to 6.47%.
Why the drop?
According to the AP, economists and Wall Street traders now expect the Federal Reserve to cut its benchmark rate, which influences borrowing costs for consumers and businesses.
“(Federal Reserve Chairman) Jerome Powell opening the door to starting to cut the federal funds rate in September, as well as a very disappointing jobs report last Friday, which opened up some conversation about whether the slowdown in the jobs market might be moving towards the beginnings of a recession, that alone would tend to push down interest rates, and that would further be kind of a kick in the pants for Powell to go ahead and start cutting interest rates a little later this year,” Tucker said.
Add all that up and it created the situation to send those mortgage rates south.
“So that was sort of a perfect storm of economic data to start pushing down mortgage rates. And the proof is in the pudding. They came they are now down about half a point just from where they were a few weeks ago,” Tucker noted.
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What does that mean for a $1M single-family home?
Tucker said $1 million is pretty close to the median single-family home price in King County and the reason that mortgage rates are so meaningful is because they are getting multiplied by large loan numbers.
“So what that works out to is now the principal and interest on that mortgage payment, creeping down toward $5,000 for an $800,000 loan, so that’s if you put 20% down on that million-dollar house, that’s down almost $300 from where that typical mortgage payment would have been just about a month ago,” Tucker said,
In other words, if someone was paying $5,300 a month last year, they are now paying around $5,000.
Will more homeowners be refinancing now?
Tucker said the Mortgage Bankers Association weekly survey showed a bump in refinance activity.
“It’s bumping up from some of the absolute lowest on record,” he explained. “There are not a whole lot of folks for whom it has made sense to refinance lately, so that industry is just barely coming back to life, but there are certainly people out there for whom this drop in rates is starting to make it pencil out to think about refinancing.”
“And I think if this trajectory continues, we’ll see a lot more folks for whom the numbers will work out to go ahead and refinance, getting back down into that kind of six-point-something percent range on their mortgage,” he continued.
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But what do the lower rates mean for buyers?
KIRO Newsradio brought up that homeowners with mortgage rates below 6.5% are likely not selling so the lower rates don’t make much of a difference for prospective buyers. While Tucker somewhat agreed, he brought up a different perspective.
“Yeah, buyers are still facing some pretty tough conditions out there with high prices and inventory is below where it was before the pandemic, kind of in a more normal era, but we may need to start just kind of forgetting about the pre-pandemic era and thinking about a new normal of what does inventory tend to look like in this day and age? And by that standard, there’s actually a fair number of homes sitting on the market this month,” Tucker responded.
The Windemere economist went on to explain why this is a low-key good time for buyers to enter the housing market.
“Inventory has been kind of building up, and this period of time, I think of it as kind of the dog days of summer, can be a sneaky good time to find a house because there are a bunch of these listings that have kind of languished,” Tucker said. “Maybe other other competing buyers are out on vacation, people are already gearing up for back-to-school (season). So this is a time of year when you tend to see the most listings on the market to choose from. So I think that sort of range of options out there, combined with lower mortgage rates, is actually making this a pretty good window of time for buyers.”
Could this be considered a buyers market?
“Still not a buyer’s market, though?” KIRO Newsradio asked during their exchange.
“I don’t think I’d go that far,” said Tucker.
However, Tucker noted that opportunities are there.
“It’s swinging towards a buyer’s market. I’d arguably say it’s actually fairly balanced right now and that is a turn from where it was this spring, when we had a lot of homes going in bidding wars, going pending in five days, you see those listings hit on Thursday and they’ve got an offer review date for Tuesday,” Tucker explained. “That’s a lot less common now, the homes that are presented well and priced right, are still getting that action but a lot of other homes are lingering on there for a few weeks, which is usually a signal that that seller is probably willing to negotiate.”
Tucker went on to say that sellers are eager to complete transactions and may work with buyers to help them come to fruition.
“They want to make a deal happen,” he continued. “So, if buyers are willing to get out there and talk to them, have their agent talk and maybe open a negotiation, they might find the right house right now.”
Contributing: Aaron Granillo, KIRO Newsradio; The Associated Press
Julia Dallas is a content editor at MyNorthwest. You can read her stories here. Follow Julia on X here and email her here.
