Mortgage rates have dropped to the lowest level since August, falling for the sixth week in a row.
The 30-year fixed-rate mortgage averaged 7.03% Thursday, down from 7.22% a week ago and nearly 7.8% just six weeks ago, according to Freddie Mac.
That, of course, means it’s cheaper to buy a home now than it was in recent weeks. But the rate still exceeds the year-ago level of 6.33%. And 7% isn’t a cheap rate in the context of the last 15 years.
Related: Mortgage rates need to hit this target before buying a home really makes sense again
“When rates began to rapidly drop, purchase applications rebounded initially,” said Sam Khater, Freddie Mac’s chief economist.
“But this improvement in demand diminished in the last week. Although these lower rates remain a welcome relief, it is clear they will have to further drop to more consistently reinvigorate demand.”
Weak sales
Confirming that view, existing-home sales dropped 4.1% in October from September to an annual rate of 3.79 million, the lowest since 2010. Sales sunk 14.6% from a year ago, according to the National Association of Realtors (NAR).
"Prospective home buyers experienced another difficult month due to the persistent lack of housing inventory and the highest mortgage rates in a generation," said NAR Chief Economist Lawrence Yun.
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While the inventory of unsold existing homes expanded 1.8% in October from September, it still stood only at 1.15 million on Oct. 31. That’s the equivalent of 3.6 months' supply at the current monthly sales pace. A supply-level below six months is considered to be a tight market.
The price news in October wasn’t so hot either. The median existing-home sales price climbed 3.4% in October from a year ago to $391,800, a record high for the month.
The bright side
That constituted the fourth straight month of year-over-year price increases. To be sure, there was a silver lining: the sales price eased 0.6% from $394,300 in September.
Also on the bright side, “multiple offers are still occurring, especially on starter and mid-priced homes, even as price concessions are happening in the upper end of the market," Yun said.
So what does this mean for a renter hoping to buy? There are two good reasons to hold off for now. First, mortgage rates remain high compared to the last 15 years.
And second, there’s a good chance mortgage rates will continue to slide. That’s because a softening economy, which many economists and analysts expect, could push interest rates down, including mortgage rates. A weakening economy also could push home prices down.
So patience may be a virtue now.
