Prime Highlight:
- Mortgage rates recorded their biggest one-day drop in over a year, falling to 6.29% after the release of a weaker August jobs report.
- The decline has given homebuyers and homebuilder stocks a much-needed boost, with lenders even quoting rates in the high 5% range.
Key Facts:
- The average rate on the 30-year fixed mortgage fell 16 basis points to 6.29%, the lowest since October 3.
- Homebuilder stocks Lennar, DR Horton, and Pulte rose nearly 3%, while the iShares U.S. Home Construction ETF (ITB) gained about 13% in the past month.
Key Background :
The U.S. housing market received a boost on Friday as mortgage rates posted their steepest single-day decline in more than a year.
According to Mortgage News Daily, the average rate on the 30-year fixed mortgage fell by 16 basis points to 6.29%, following the release of a softer-than-expected August employment report.
This drop marks the lowest level since October 3 and breaks the pattern of rates being stuck in the high 6% range for months. The shift is also notable when compared with May, when the same rate peaked at 7.08%. Industry experts say the move was a direct reaction to the jobs data, which influenced bond market activity.
Matt Graham, Chief Operating Officer at Mortgage News Daily, explained that the bond market tends to react strongly to employment figures. “It’s a good reminder that the market gets to decide what matters in terms of economic data, and jobs reports consistently drive volatility in rates,” he noted. Graham also mentioned on X (formerly Twitter) that some lenders are already quoting in the high 5% range, making mortgages more appealing to prospective buyers.
For households, the difference is meaningful. A buyer purchasing a $450,000 home with a 20% down payment would see monthly payments drop by roughly $169 when comparing a 7% rate to 6.29%. While that figure may appear modest, it could determine whether many families qualify for a loan.
The stock market reflected the optimism, with homebuilders Lennar, DR Horton, and Pulte all gaining close to 3% during Friday’s session. The iShares U.S. Home Construction ETF (ITB) has climbed nearly 13% in the past month as rates have gradually eased.
Still, affordability challenges remain. Mortgage applications to purchase a home were 6.6% lower last week compared to four weeks earlier, according to the Mortgage Bankers Association. Danielle Hale, chief economist at Realtor.com, emphasized that both buyers and sellers are navigating a tough environment, with high prices and limited affordability keeping many potential homeowners on the sidelines.
The recent drop in rates is a welcome change, but experts believe real momentum will come only if rates fall closer to the 5% range. For now, the housing market is showing signs of hope, though challenges remain.
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