Mortgage Rates Drop Below 7%: Are Millennials Finally Catching a Break in the Housing Game?
Sky-high inflation and mortgage rates have added an extra hurdle for many would-be homebuyers. If that’s you, the past few weeks have presented an opening.
According to Freddie Mac, the average rate for a 30-year fixed home loan went from 6.95% a few weeks ago to 6.78% for the week ending July 26. The average rate for 15-year fixed-rate mortgages also reached a recent low of 6.07%.
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According to Sam Khater, Freddie Mac's chief economist, in a statement released July 11, "Following June's jobs report, which showed a cooling labor market, the 10-year Treasury yield decreased this week, and mortgage rates followed suit."
High interest rates over the past months have paused buyers and sellers. Compared to the pandemic-era interest rates of 3% or less, rates under 7% are still high. But if you look at the historical average, it’s actually a fair rate. Compared to 1981’s interest rates above 18%, it’s actually low.
However, another key metric recently shifted in favor of new homebuyers: home prices fell 1.1% year over year for the week ending July 6, after nine weeks of steady or rising prices.
The rate has not risen above 7% for eight weeks now. But that number is still too high for many would-be buyers hoping for even lower rates.
According to the St. Louis Fed, the median-priced home cost $412,300 in Q2 of 2024, down from $426,800. However, that’s still too high for many buyers.
But a plus for possible negotiation? Sluggish markets mean homes spend an average of five extra days on the market. That means buyers have more time to make decisions and negotiate.
Buyers in Alabama, Arkansas, Indiana, Iowa, Kansas, Mississippi, Missouri, Michigan, Ohio, Oklahoma, Nebraska, or Pennsylvania could all enjoy average home prices hovering closer to $250,000. The cheapest state to buy a home in the country is currently Iowa, with median home prices of $229,000, followed by Ohio and Oklahoma, tied with a median of $235,000.
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Should you buy now? On a $300,000, 30-year mortgage with a 7% interest rate, you’ll pay $418,526.69 in interest alone over the loan’s lifetime, more than the total value.
With a $700,000 mortgage, the total interest paid over 30 years jumps to just under $1 million. With a 4% interest rate on the $300,000 loan, you’d pay $215,608.52 in interest and just over $500,000 on the $700,000 loan.
While rates under 7% are hardly a giant lifeline, with average home price appreciation, for many first-time homebuyers, getting a mortgage with those rates now is a better financial move than waiting possibly years for rates to drop to more favorable levels.
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This article Mortgage Rates Drop Below 7%: Are Millennials Finally Catching a Break in the Housing Game? originally appeared on Benzinga.com
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