A slowdown in inflation is finally being felt in the housing sector, with mortgage payments falling for the first time in four years.
The median mortgage payment fell 0.1% in the four weeks to Aug. 18 to $2,587 at an interest rate of 6.49%. According to the data Real estate company Redfin made the announcement on Thursday.
Mortgage rates have fallen slowly over the past year, falling from a 20-year high of 7.8 percent in October to 6.49 percent earlier this month, according to Freddie Mac, the national mortgage backer.
“The late summer decline in mortgage rates continued last week, with 30-year fixed rates dropping to 6.5%, the lowest since May 2023,” Bob Broeksmit, CEO of the Mortgage Bankers Association, said in a statement.
Mortgage applications fell last week as home prices remain high despite lower interest rates and monthly payments.
“Mortgage refinance and purchase applications both declined last week, which may indicate that some borrowers are hoping for interest rates to fall further before deciding to apply,” Broeksmit said.
Pending home sales are down 5.3% over the past year, according to Redfin data, and are the biggest drop in the past nine months excluding the four-week period ending Aug. 4. Mortgage purchase applications are down 8%.
Inflation in the residential sector has been below overall inflation and has been falling since 2023, with owner-occupied equivalent rents falling from an annual increase of 8.1% in April last year to 5.3% in July.
While inflation remains elevated, with the Consumer Price Index (CPI) hovering around 3% over the past year, housing costs have fallen more steadily, with owner-occupied and residential rent costs both declining steadily from recent highs.
Home prices overall rose 3.6% year over year and remain near all-time highs, according to Redfin. The median U.S. home sale price fell to $412,300 in the second quarter from $426,800 in the first quarter. According to the data From the Census Bureau and the Department of Housing and Urban Development.
Still, that’s well above pre-pandemic levels: Average home prices have risen more than 25% since the first quarter of 2020.
