As of Monday, September 16th, the daily average for 30-year fixed mortgage rates has dipped to 6.12%, marking their second-lowest level in nearly two years. This represents a nearly 0.3% decrease from the initial drop observed on August 5th and stands in stark contrast to the 7.5% zenith reached in April. Remarkably, homebuyers have experienced a surge in purchasing power, gaining over $30,000—approximately $200 per month—since early July. As of September 1st, median monthly housing payments have plummeted to $2,534, the lowest point since January. Additionally, the Federal Reserve’s unexpected decision to cut rates by 50 basis points (0.5%) in their September 18th meeting adds further complexity to the current landscape. Markets had anticipated a swifter pace of reductions, suggesting that mortgage rates might experience a slight uptick in the coming days before stabilizing.

The gradual decline in mortgage rates since May, attributed largely to persistent improvements in inflation, has resulted in a decrease of over 1.10% compared to last year. October may bring further year-over-year improvements, especially considering that rates surpassed 8% in the same month last year—a threshold not seen in over two decades.

Good news for prospective homebuyers extends beyond falling rates. The inventory of total listings has risen by 20% compared to last year, as an increasing number of sellers enter the market. This trend suggests a potential reprieve for buyers. Therefore, if you’re contemplating whether to purchase now or delay, the current environment might be opportune.

Is it prudent to purchase a house at this juncture? The concise answer is: Yes. If your financial situation permits, now is an advantageous time to acquire property before the market adjusts. Delaying in anticipation of further rate reductions could expose you to heightened competition among buyers and potential price escalations by sellers. With sales remaining tepid, now might be the moment to take action.

Purchasing a home now also maximizes your investment potential. Lower rates translate into significant savings over the life of your loan, allowing a larger portion of your payments to contribute towards building equity.

However, the market remains volatile. For instance, while higher mortgage rates typically depress house prices, this trend has not manifested over the past two years. Additionally, decreased inventory generally increases competition, yet high prices have left many buyers priced out, resulting in some homes languishing unsold while others are swiftly purchased.

Economists remain uncertain about the trajectory of mortgage rates in the coming months, and housing prices continue to hover near historic peaks. Despite the promising start to the week, it is prudent to remain prepared for any unforeseen developments.

Will mortgage rates continue to decline in 2024? Current mortgage rates are reflective of investor expectations regarding Federal Reserve actions. Investors anticipate that the Fed’s efforts to curb inflation have concluded and expect a gradual decline in mortgage rates through the year’s end. In essence, economists foresee limited further reductions in mortgage rates, as recent rate cuts have already been factored into the current rates.

How did we arrive at this point? Over the past decade, a severe shortage of homes significantly contributed to the housing boom of 2021-2022. An excess of buyers contending for a limited supply of homes led to soaring prices, exacerbated by historically low mortgage rates. This shortage was partly due to chronic underbuilding since the 1980s.

However, as construction activity rebounded in 2023 and 2024, inventory began to recover, yet prices continued to rise despite high mortgage rates. Typically, higher rates should dampen demand and prices, but many homeowners retained their pandemic-era rates, further constraining the supply of homes for sale. This unique phenomenon persists today, with the national median sale price peaking in June and many buyers still staying on the sidelines. Those who are purchasing are often seeking more affordable regions like Texas and Upstate New York. Despite rising inventory and sluggish sales, house prices remain at unprecedented levels with little sign of decline.

The recent reduction in mortgage rates has invigorated prospective homebuyers with renewed optimism.

Home sellers should brace for intensified competition. The recent decline in mortgage rates is likely to attract more buyers, leading to increased competition for available listings. Buyers who were previously deterred by high rates have been waiting for this opportunity, and as rates continue to drop, more are poised to re-enter the market.

Should you lock in your mortgage rate now? If your financial position allows, now is an excellent time to secure a favorable mortgage rate. Rates are currently at their lowest in nearly two years. Lower rates enable you to qualify for a larger loan or enjoy reduced payments within your existing budget. If the rates still seem high, consider buying down your mortgage rate. All-cash buyers aiming to avoid mortgages altogether should also act swiftly to circumvent potential price increases as rates continue to decline.

Final thoughts: If you’re in the market for a home and have been hesitant due to high rates, now is an advantageous time to engage with an agent and begin your home search. Rates are expected to trend downward, and the market is gaining momentum. Delaying your decision could mean facing increased competition in the future.