Mortgage rates slipped to their lowest level since mid-December this week, giving some opportunistic buyers a small chance to save.
According to Freddie Mac, the average interest rate on the 30-year fixed-rate mortgage fell to 6.33% from 6.48% the previous week. The fall came as investors awaited December government inflation data, which showed on Thursday that consumer price growth had fallen to its lowest level in over a year.
For some buyers, the fall in interest rates gives them a bit more bargaining power – as seller concessions become more common and competition remains less. For some homeowners, the decline also presented a tight refinancing opportunity.
“Incentives are real estate agents’ secret weapon to motivate buyers who are still very reluctant to buy or wait,” Via Real Estate Group president Adriana Perezchica told Yahoo Finance. “Lots of misinformation and sensational news have confused anyone interested in buying a home. There are buyers who need to relocate now, or those who recognize the opportunity will be the only ones to reap the benefits.”
Buyers have the upper hand
Buyers are increasingly finding sellers trying to lure them in the old-fashioned way – through incentives – after higher mortgage rates shrunk demand.
A record 42% of homes sold in the last three months of 2022 contained concessions from sellers, up from just over 30% in the previous quarter, according to a recent Redfin report. These concessions included mortgage interest buybacks, cash for repairs or closure costs, and home appliance warranties.
“Within the last three months, 100% of my clients have [received incentives] for closing costs and upfront payments,” Perezchica said. “Anyone has the opportunity to be inspected without waiving contingencies and for the first time in 10 years they have the upper hand over the terms of the negotiation.”
A sign announces “excellent incentives” for buyers in the Windsor Square development in Buckingham, Pennsylvania. (Credit: William Thomas Cain/Getty Images)
Another selling strategy that is gaining popularity is discounts. According to Realtor.com, 13.6% of homes on the market had a price drop in the last month, up from 7.1% a year ago.
The story goes on
“In December, the buyers I signed received all concessions to use for closing costs, pay up front, or lower their interest rate,” Perezchica said. “However, most of them would rather keep money in their pockets and use it towards closing costs.”
That helps take the sting out of prices.
The national median listing price is still 8.4% higher than a year ago, and with mortgage rates increasing, the cost of financing 80% of a typical home is 58.9% higher than a year ago. Still, the national median listing price fell to $400,000 in December, Realtor.com data showed, continuing its steady decline from June’s record high of $449,000.
“Probably in 2023, real estate prices will stabilize,” Keith Gumbinger, vice president of HSH.com, told Yahoo Finance, “or become more affordable in areas that were once very popular as most buyers can no longer afford [seller] Expectations.”
Realtors arrive for a realtor tour showing a home for sale in San Rafael, California. (Credit: Justin Sullivan/Getty Images)
opportunity for owners
The recent drop in interest rates also led to a surge in refinancing requests, the latest data from the Mortgage Bankers Association (MBA) showed. The share of refinancing requests increased by 5% last week.
“The mortgage market started 2023 on a positive note, with a decline in mortgage rates leading to a surge in refinance requests,” MBA President and CEO Bob Broeksmit said in an emailed statement.
Still, refinances remain 86% lower than a year ago, and only a small pool of homeowners can take advantage of current interest rates to lower their monthly payments. According to mortgage technology and data provider Black Knight, just 760,000 homeowners could save three-quarters of a point off their current mortgage, with just 272,000 high-quality candidates left.
“The demographic that can benefit in this regard is historically very small and consists of mortgages that are a decade or more past repaid and are held by borrowers who have had ample opportunities to refinance at significantly better rates in recent years.” , Andy Walden, vice president of Black Knights corporate research and strategy, told Yahoo Finance.
Most refinances these days are homeowners tapping into the wealth built in their homes, Walden added.
“Interest rates are starting to get better,” Jason Sharon, owner of Home Loans Inc., told Yahoo Finance. “Coupled with record levels of home equity and high levels of consumer debt, we’re seeing HELOCs and cash-out refis to save money on a monthly basis.”
Gabriella is a personal finance reporter at Yahoo Finance. Follow her on Twitter @__gabriellacruz.
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