Mortgage Rates Dip Below 6% For First Time in Months: What That Means For You

Mortgage rates have fallen below 6% for the first time in several months. This means a homebuyer with a monthly budget of $2,500 can now afford a $400,000 home.

What Happened: The average daily mortgage rate came in at 5.99% last week, the first sub-6% average since mid-September, according to Mortgage News Daily.

However, the buying power of homebuyers is still not as strong as it was a year ago when rates were around 3.5%. But, with rates dropping by over a full percentage point from the highs, it's a welcome change for buyers who were waiting for the right moment.

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The decline in mortgage rates has caused some buyers to return to the market. Recently, pending home sales have fallen by 23% from a year ago, which is an improvement from the November dip when they declined by 33%.

Redfin’s Homebuyer Demand Index, which measures requests for tours and services, has also gone up by 19% since October. This is also reflected in the number of newly listed homes accepting offers within two weeks of being listed — 37% of homes have accepted offers, the highest level since July.

Home sellers are starting to show up again, too. Although new listings of homes for sale have declined by 17% year over year, this is the smallest decline in the past four months and is better than the December trough when new listings dropped by 24%.

Mortgage-purchase applications have risen by 15% from their early-November low, but declined by 10% from the previous week.

This can be a sign that the housing market recovery is still in its early stages. It's crucial to note that the mortgage buy application index has been volatile lately, Redfin said, making it challenging to draw any firm conclusions from the fall.

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