Homebuyers Have Gained Nearly $30,000 in Purchasing Power Over the Last Month Thanks to Mortgage-Rate Drop

Homebuyers Have Gained Nearly $30,000 in Purchasing Power Over the Last Month Thanks to Mortgage-Rate Drop

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House hunters should consider jumping into the market now, with last week’s soft jobs report sending mortgage rates to their lowest level since April 2023.

Daily average mortgage rates have dropped to their lowest level since April 2023, welcome news for homebuyers who have been waiting for affordability to improve. 

A homebuyer on a $3,000 monthly budget can afford a $466,000 home with a 6.35% mortgage rate, roughly the daily average on August 5. That buyer has gained nearly $30,000 in purchasing power over the last month alone: They could have purchased a $437,250 home with a 7.15% rate, roughly the daily average at the start of July. And that same buyer has gained more than $40,000 in purchasing power since April, when mortgage rates hit a five-month high of about 7.5%.

To look at affordability another way, the monthly mortgage payment on the median-priced U.S. home, which goes for roughly $443,000, is $2,842 with today’s average mortgage rate. Just one month ago, the payment would have been $3,032, nearly $200 more.

“Mortgage rates are falling further and faster than expected due to last week’s soft jobs report and mounting recession fears,” said Redfin Chief Economist Daryl Fairweather. “For house hunters who have been waiting for rates to fall before they buy a home: Now is the time. Mortgage rates may decline more as the year goes on, but that will invite competition and push home prices higher, likely canceling out the savings from a lower mortgage rate.” 

Redfin economists expect more new listings in 2025 as move-up buyers try to take advantage of lower rates. But demand will likely exceed supply, causing homes to sell faster and more often for above the listed price. Buyers should consider getting ahead of the herd by taking advantage of improving affordability and the big pool of stale inventory to choose from, Fairweather said. 

It’s still difficult for many Americans to afford a home. Sale prices remain near record highs, and while mortgage rates have fallen significantly from their recent peak, they’re still more than double pandemic-era lows. 

This week’s economic data is volatile, and mortgage rates could rise a bit over the next few days. U.S. treasury yields, one indicator of where mortgage rates will go, fell to a one-year low on August 5 but bounced back just hours later after a Fed official said the weak jobs report doesn’t indicate a recession. 

That volatility is another reason Redfin economists suggest homebuyers who have been waiting for rates to drop act quickly. Buyers should also shop around for the lowest mortgage rate, and those who are already under contract may consider checking back in with their lender to make sure they have the best available rate. It’s also worth noting that current mortgage rates have already priced in aggressive interest-rate cuts from the Fed. That means that while rates may tick down further in the next few months, homebuyers shouldn’t expect them to drop significantly more than they already have.

Dana Anderson

Dana Anderson

As a data journalist at Redfin, Dana Anderson writes about the numbers behind real estate trends. Redfin is a full-service real estate brokerage that uses modern technology to make clients smarter and faster. For more information about working with a Redfin real estate agent to buy or sell a home, visit our Why Redfin page.

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