Mortgage rates are down. The housing market is still moribund.
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The rate on the 30-year-fixed mortgage is at 6.55%, the lowest since May 2023, per data out Wednesday morning from the Mortgage Bankers Association.
Why it matters: It's a sign the housing market might be starting to thaw.
Where it stands: For the relative handful of people who bought a house at record-high mortgage rates over the past couple of years, lower rates mean an opportunity to refinance.
- Refinances are up 59% from this time last year, per the MBA — though they're still at very low levels.
Follow the money: For those looking to buy, slightly lower mortgage rates mean they can afford a slightly more expensive home now than last month.
- Redfin estimates that lower rates mean a $30,000 increase in purchasing power on a median-priced home.
The big picture: Though the Federal Reserve hasn't yet cut anything, the expectation that it will cut in September is driving down yields on long-term bonds, and that translates into lower mortgage rates.
- There's room for them to fall even further.
Reality check: Don't get too excited. Most Americans won't refinance, since their mortgages are at much lower rates than what's available now. And for the same reason, they're reluctant to sell their existing home and buy one at a new, higher rate.
- Nearly 90% of mortgage holders have a rate below 6%.
Zoom out: It's going to take a bigger drop to really move the housing market, says Moody's economist Nick Villa in a note out Monday.
- Plus, home prices are still high. Despite years of higher mortgage rates, which some believed would lower home prices — they've barely moved.
Editor's note: This story was corrected to reflect the data was released Wednesday (not Tuesday), and the Moody's note was issued Monday (not Tuesday).
