Redfin states [1] that falling mortgages are giving homebuyers increased purchasing power in the current housing climate.
The report states that with the average 30-year fixed-rate mortgage at 3.2%, a homebuyer with a $2,500 monthly mortgage budget could purchase a home priced $51,250 higher than in MArch 2019 when rates were 4.4%.
Additionally, the monthly payment on a $457,000 home has fallen from $2,500 in 2019 to $2,250.
“Potential homebuyers now have an extra incentive to buy a home despite all of the economic uncertainty from the coronavirus,” said Redfin Chief Economist Daryl Fairweather. “Many current homeowners now have the option to refinance their mortgages and gain some extra spending cash each month. Low interest rates won’t help with direct impacts of the coronavirus on the economy like declines in tourism and service sector spending, but they will mitigate impacts to housing.”
While inventory has been a struggle, Redfin reports that were deemed affordable on a $2,500 monthly payment rose 1.9 percentage points nationally from 68.6% to 70.5% when comparing the week of March 4 and March 10 from 2019 to 2020.
Dallas experienced the highest increase in affordable inventory, seeing that share rise by 6.2 points. Portland, Oregon, reported a 5.2-point increase and Richmond, Virginia, reported a 4.3-point increase.
“I just had a buyer who was at the top of his budget lock in a 2.99% mortgage rate and he is ecstatic at how much more flexibility his finances will have thanks to the interest rate drop,” said Portland Redfin agent Meme Loggins. “Another one of my buyers was looking at condos just a few weeks ago because he didn’t think he could afford a single-family home, but thanks to the low rates he can now. Homebuyers in every price range are excited, even those looking at homes priced well over $1 million. Unfortunately, we are still facing competition on every offer, which leads us to drop contingencies and offer above list price. With the inventory crunch, these low rates are definitely adding to the frenzy.”
While still nearing record lows, Freddie Mac reported [2]the average 30-year fixed-rate mortgage rose slightly to 3.36%.
“As refinance applications continue to surge and lenders work to manage capacity, the 30-year fixed-rate mortgage ticked up from last week’s all-time low,” said Sam Khater, Freddie Mac’s Chief Economist. “Mortgage rates remain at extraordinary levels and many homeowners are smartly weighing their options to refinance, potentially saving themselves money.”
The average rate is a 0.7 point increase from the prior week’s 3.29%. The 15-year fixed-rate is now 2.77%, which is a slight decline from last week’s 2.79%.