Mortgage rates have decreased compared to a year ago. Last October, the average rate for a 30-year loan exceeded 7%, whereas currently, the average rate stands at 6.44%. Recently, mortgage rates were closer to 6%, making it a more advantageous time to sign a mortgage now than it was in late 2023.
However, potential borrowers might consider postponing taking out a mortgage due to several reasons.
Home Prices Remain High: Despite potential savings on mortgage rates compared to last year, home prices have increased. The National Association of Realtors (NAR) reported a median existing-home sales price of $404,500 in September, up 3% from $392,700 a year earlier. This marks the 15th straight month of year-over-year increases. Waiting for a potential decline in home prices during the winter months, which often see decreased buyer demand, might result in less spending on home purchases by early 2025.
Possibility of Further Rate Reductions: The Federal Reserve has already reduced its benchmark interest rate once this year and is expected to implement further cuts before the end of 2024. This could lead to a further decrease in mortgage rates. Delaying a mortgage decision could result in securing a more favorable rate. Regardless of timing, it is essential for prospective buyers to shop around and compare mortgage offers.
- Limited Inventory Availability: According to the NAR, there was a 4.3-month supply of homes in September, which, although up 23% from the previous year, remains below the 6-month supply typically needed for balanced buyer demand. A low inventory gives sellers an advantage, allowing them to demand higher prices due to limited buyer options. As mortgage rates decline further into the new year, more sellers might list their homes, increasing inventory and potentially leading to better prices. Hence, waiting to apply for a mortgage could be beneficial.
Individuals who have been attempting to purchase a home for a while might feel discouraged by their progress. They might be tempted to secure a mortgage because of slightly lower rates. However, by delaying their decision by a few months, they might be able to achieve a more favorable deal on both a home and its financing.
