Buying a house requires thinking about four key measures: the house, the neighborhood, the price of the property and, of course, the rate on the mortgage.
In the past few weeks, mortgage rates have to started to fall to levels low enough that buyers might want to start watching and making plans.
As of July 12 lenders were quoting rates on 30-year mortgages at under 7%, according to both Freddie Mac and Mortgage News Daily.
Freddie Mac (FMCC) is one of the biggest providers of capital to housing lenders. Mortgage News Daily is a news site that tracks housing finance
Related: Housing market seeks Fed rate-cut relief as sales slump
If the Federal Reserve cuts its key rate in September, as is now expected, there's a good chance rates will move to 6%, maybe lower.
You want lower rates
When rates fall, the principal and interest payment each month becomes more affordable.
Last October, when mortgage rates jumped to 8%, a $300,000 loan would require a monthly payment of $2,207. (Taxes and insurance are a separate matter.)
After the Fed announced in fall 2023 that it wasn't raising its key rates any more, rates eased. They dropped below 7% in late January. That produced a monthly payment of about $1,918, as mortgage lenders assumed the Fed would cut rates a number of times in 2024.
But inflation proved stickier than anyone expected, including the Fed, whose key rate has been stuck at 5.25% to 5.5% for more than a year.
As a result, rates moved up to 7.5% in April. At that level, the monthly payment on the $300,000 loan is $2,102.
If you were thinking of buying in April in that mortgage environment, you probably thought, "We'll wait."
And one can see that waiting mentality at work in the most recent data on existing-home sales.
In July, the National Association of Realtors estimated existing-home sales in June were running at a 4.11-million-unit clip, off slightly from May and down 2.8% from June 2023.
Sales are down about 40% from 2021 levels.
New-home sales aren't much better, with sales rates also down 40% from 2021 levels.
A home-buying surge with lower rates
At 6.8%, the payment is about $1,960, which is 11.1% lower than what you might have paid in October 2023.
You might want to wait a bit longer to see if the rate on a mortgage drops under 6%.
Many housing experts expect home-buying activity to surge if that happens. For good reason: The monthly payment drops under $1,800.
You can plug your numbers into payment calculators at a number of sites, including Zillow (Z) , Rocket Mortgage, operated by Rocket Mortgage (RKT) , and Bankrate.com.
Mortgages are available at banks, savings institutions, credit unions and mortgage companies.
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Big national builders, like Pulte (PHM) and D.R. Horton (DHI) , also have access to mortgage financing if buyers want it.
Existing-home sales have been depressed for several years as buyers have balked at high prices and high mortgage rates.
At the same time, sellers who bought when rates were 4% or lower are reluctant to sell because their housing costs will likely go up.
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