Ongoing trade disputes with China prompted mortgage rates to drop sharply this week. The 30-year fixed-rate mortgage averaged 3.60% this week, the lowest average since November 2016, Freddie Mac reports. For home buyers, that means greater savings in borrowing costs. Indeed, “with today’s reduction in rates at about 1%, people are getting about $35,000 to $40,000 of extra spending power right now versus a few months ago,” Scott Sheldon, branch manager at New American Funding in Santa Rosa, Calif., told USA Today.
But many would-be buyers may be left out of those savings due to the limited inventory that’s plaguing numerous housing markets across the country. “Rates are low, but does it matter if you can’t find anything you can afford?” Nela Richardson, an investment strategist at Edward Jones, told MarketWatch. “Some millennials are missing out on a once-in-a-generation opportunity because [they] think rates will go up again.”
Buyers may be preapproved for a mortgage and then struggle to find a home to buy. Last week, the number of mortgage applications for home purchases fell by 2% on a seasonally adjusted basis. John Stearns, a senior mortgage originator at Fidelity Mortgage Services in Milwaukee, says more potential buyers are coming in to get preapproved as rates drop. “But who knows when they’ll find something to buy,” Stearns told USA Today. He references one client, for example, who recently closed on a home purchase after searching for a house to buy for two years due to inventory shortages.
