Low Mortgage Rates Are Not Enough to Keep Buyers Looking

Due to rising home prices, the end has come for those to take advantage of low mortgage rates to afford a home. For the week ending September 3, an average 30-year fixed-rate mortgage came out to 2.93% reports Realtor.com. While still low, the rate continues to drive buyers into the market though low inventory and higher prices will just as easily push buyers out. If a buyer purchased a home at this time last year with a 30-year fixed-rate mortgage of 3.58%, today’s buyers would still be paying $14 more a month, says Realtor.com.

“Lower mortgage rates can’t completely offset higher costs,” said Danielle Hale, chief economist at Realtor.com.

(Realtor.com is operated by News Corp subsidiary Move Inc., and MarketWatch is a unit of Dow Jones, which is also a subsidiary of News Corp.)

When rates drop, affordability improves for a period of time. But as history has shown, low rates eventually coax more people into the housing market. That creates competition for homes, which drives prices upward.

Currently, median listing prices are 10.6% higher than a year ago, according to Realtor.com. Meanwhile, the low supply of homes for sale has meant that properties are coming off the market in record time. That increases the likelihood that a given buyer will face a bidding war, which can increase how much they must spend to get the keys to their dream home.

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