The median monthly mortgage payments in the United States fell to just over $2,500, marking the lowest level recorded in four years.
Monthly mortgage payments fell to $2,587 in the four weeks ending Aug. 18, marking a 0.1% drop year-over-year. While the decline may be small, it is the first time mortgage payments have posted any decline since 2020, according to data published Thursday by the real estate company Redfin.
The median mortgage payments declined as contract rates fell. Over the past year, rates for the 30-year term fell from a high of 7.8% in October to 6.46% in the week ending Aug. 22, per Freddie Mac. The contract rate for the 15-year mortgage term also fell from 6.55% to 5.62% within a year.
How Did the Decline in Mortgage Rates Affect Home Sales?
Despite the recent drop in mortgage rates and payments, mortgage applications fell last week. Pending home sales declined 5.3% year-over-year, marking the biggest decline in nine months. Mortgage-purchase applications also fell 8%.
Part of the reason why home sales are still sluggish is the high housing prices on the market. As of July, the median sale price of a home in the US was $439,455. Home prices were up 4.1% compared to last year and are still considerably higher than pre-pandemic levels.
Experts, however, believe home sales would increase when mortgage rates drop to the "magic number" of 6%.
"I think 6.5% I'd feel good about ... but the magic number is 5.9999," the co-founder and chief executive of realty giant Compass, Robert Reffkin, said in an interview with CNBC.
"That'd be marketing magic, and would tell the world that mortgage rates are at a level where they should go and grab a property."
Meredith Whitney, the "Oracle of Wall Street" and chief executive of a research firm, echoed Reffkin's prediction, adding that home sales will spike if rates drop below 6%.
That being said, Redfin Premier agent Gregory Eubanks noted that pending home sales are a lagging indicator of the situation in the housing market and noted that they have recently seen an uptick in buyer interest.
"Over the last two weeks, I've seen momentum build and I've felt clients get more excited about the prospect of buying or selling a home," Eubanks said in the report.
