For the second time in approximately one week, key economic numbers trended downward which translates to things looking up for homebuyers, real estate agents and mortgage brokers.
Earlier today, the Labor Department announced that the consumer-price index rose 2.9% from a year earlier. That’s the lowest level since 2021 and slightly lower than the 3.0% most economists were expecting.
There is wide speculation that the 2.9% CPI reading almost guarantees that the first of two interest rate cuts for the year will occur in September with the likelihood of a 0.50% rate drop being high.
The average mortgage rate has been on the decline and during the week of August 5 reached its lowest level in approximately 15 months. Just 9 months ago the rate was its highest at 7.79%
If the Fed moves to lower interest rates in September by as much as 0.50%, the impact on homebuyers could be significant. And in turn, the pace of activity among realtors and mortgage brokers would likely speed up.
By way of example, the mortgage today for a $300,000 home or condominium (at a 6.47% rate) would equate to a monthly mortgage of $1,890 (not including taxes, insurance or association fees, if applicable). One year ago, when the rate was 7.79%, the monthly mortgage for the same unit would have been approximately $2,158, net of other expenses.
If the rate went down another 0.50%, that mortgage on that same home or condo would decline even further, to $1,792 per month (not including taxes, insurance or association fees, if applicable). That is a savings of $102 per month in a very short time period.
According to Helen Bailey, Managing Broker, Pioneer Realty Group, the decrease from one year ago could mean different things to different people, but could portend to a busy Fall.
“Especially for first time buyers, every decrease in interest rates makes the option and the dream of buying a home a little more affordable and more attainable,” Bailey said.