Redfin Reports Bay Area Homebuyers Stand to Save Thousands on Monthly Payments Following Mortgage-Rate Decline

Rhea-AI Summary

Redfin reports that Bay Area homebuyers are seeing significant savings on monthly mortgage payments due to falling mortgage rates. The average 30-year mortgage rate dropped from 7.2% in late April to 6.1% in mid-September, leading to substantial decreases in monthly housing payments across major U.S. metros.

Key highlights:

• San Jose saw the largest drop, with payments falling by over $2,000 to $9,398
• San Francisco and Oakland followed with drops of $1,372 and $1,338 respectively
• 44 out of 47 analyzed metros experienced payment decreases
• Oakland led in percentage decline with a 19.1% drop

Redfin economists advise potential buyers to consider entering the market now, as mortgage rates are unlikely to fall much further and home prices may increase as demand returns.

Positive

• Significant decrease in monthly mortgage payments for homebuyers, especially in the Bay Area
• Mortgage rates dropped from 7.2% to 6.1%, improving affordability
• 44 out of 47 analyzed metros experienced payment decreases
• Potential increase in housing demand due to improved affordability

Negative

• Mortgage rates unlikely to drop much further according to Redfin economists
• Potential increase in home prices as demand returns
• Housing payments still remain high in absolute terms, especially in expensive markets

Insights

Financial Analyst

The recent decline in mortgage rates from 7.2% to 6.1% has significantly impacted housing affordability, particularly in high-cost markets like the Bay Area. This shift presents both opportunities and challenges for the real estate market:

• In San Jose, monthly housing payments have decreased by $2,000, a substantial 18.2% drop. Similar trends are observed in San Francisco and Oakland.
• The median sale price in San Jose has fallen by 7%, partly due to seasonality, but also reflecting market adjustments.
• 44 out of 47 analyzed metros showed decreased housing costs, indicating a broader trend.
• This "sweet spot" for buyers may be temporary, as increased demand could drive prices up if supply doesn't keep pace.
• Redfin (RDFN) stands to benefit from increased market activity, potentially boosting transaction volumes and revenues.

However, investors should note that while this news is positive for homebuyers and could stimulate market activity, it may not translate to immediate gains for Redfin's stock. The company's performance will depend on how effectively it capitalizes on this market shift and manages operational costs in a still-challenging real estate environment.

Market Research Analyst

This report highlights a significant shift in the housing market dynamics, particularly beneficial for potential homebuyers:

• The 15.3% drop in mortgage rates (from 7.2% to 6.1%) has dramatically improved affordability, especially in high-cost regions.
• Bay Area markets show the most substantial improvements, with San Jose, San Francisco and Oakland seeing the largest decreases in monthly payments.
• The trend is widespread, affecting 44 out of 47 analyzed metro areas, indicating a national phenomenon.
• This shift could potentially reignite demand in previously cooling markets, particularly benefiting companies like Redfin that operate digital platforms for real estate transactions.
• However, the warning that this might be a temporary "sweet spot" suggests potential for market volatility in the near future.

For Redfin (RDFN), this situation presents a strategic opportunity to capitalize on increased market activity. However, investors should be cautious as the company's ability to translate this market shift into sustainable growth and profitability remains to be seen, especially given the cyclical nature of the real estate market.

Mortgage rates have fallen to 6.1% from over 7% in the spring, pushing housing payments down by thousands of dollars in the Bay Area and hundreds of dollars in most other major metros

SEATTLE--(BUSINESS WIRE)-- (NASDAQ: RDFN) —The typical San Jose, CA homebuyer’s monthly housing payment has fallen more than $2,000 from its springtime peak, landing at $9,398 in mid-September. That’s according to a new report from Redfin (redfin.com), the technology-powered real estate brokerage. San Jose saw the biggest drop in monthly housing payments among the U.S. metros Redfin analyzed.

Housing payments are falling due mostly to lower mortgage rates: In anticipation of the Fed’s historic interest-rate cut, which happened last week, the average 30-year mortgage rate fell to 6.1% in mid-September from roughly 7.2% at the end of April. Home prices falling from their peak also play a part in declining housing payments; San Jose’s median sale price dropped about 7% over that period (some of that decline is due to typical seasonality).

Two other Bay Area metro areas saw the next-biggest drops in median housing payments. In San Francisco, the median payment has dropped $1,372 from its April peak to $9,330, and in Oakland it has dropped $1,338 to $5,676. Southern California metros round out the top five places where payments have dropped most, with an $840 decline in Anaheim and a $670 decline in Los Angeles.

This is according to a Redfin analysis of median monthly housing payments, which are calculated using average 30-year fixed mortgage rates and median sale prices, and assume a 20% down payment. The analysis calculates median housing payments in major U.S. metro areas for the four weeks ending September 15 (the most recent data available), and compares them to the four weeks ending April 28, when the U.S. median monthly housing payment hit an all-time high.

The Bay Area also leads the pack in percentage declines. In Oakland, housing payments have fallen 19.1% from the springtime peak, and in San Jose they have fallen 18.2%. Three southern metro areas round out the five places where payments have posted the biggest percent declines: Austin, TX (-14% to $2,757), Jacksonville, FL (-14% to $2,263) and Nashville, TN (-13.1% to $2,829).

Housing costs fell in 44 of the 47 metros included in Redfin’s analysis. They rose slightly in Newark, NJ ($39), Nassau County, NY($26) and Cleveland ($25) due to increases in local home prices outweighing mortgage-rate declines.

Mortgage rates dropped in anticipation of Fed’s interest-rate cut

This is good news for homebuyers, who have been waiting years for a meaningful drop in housing payments. The cost of buying a home began rising in early 2022 as the Fed increased interest rates to battle inflation, which pushed up mortgage rates. That dampened demand, but it dampened supply even more, driving up home prices despite slow sales. Median monthly mortgage payments peaked in April, when home prices were approaching their all-time high and mortgage rates were sitting above 7%.

Now, housing payments have fallen substantially from their peak because mortgage rates are declining. Rates started falling over the summer in anticipation of the Fed cutting interest rates for the first time in four years; the Fed finally did cut rates aggressively last week. Home prices have also fallen from their peak—more significantly in some metros than others—but they have generally stayed high due to low inventory.

Redfin economists to house hunters: Mortgage rates are unlikely to drop much further, and prices may increase

Mortgage rates are unlikely to drop much further than they already have, as markets had already priced in the Fed’s rate cut prior to last week, and the upcoming Fed rate cuts may push mortgage rates down to around 5.7%—but not much lower. Plus, home prices may increase as lower rates bring back demand.

“House hunters who have been waiting on the sidelines for costs to fall should seriously consider jumping into the market now,” said Chen Zhao, Redfin’s economic research lead. “We’re in a sweet spot for buyers. This may be close to the bottom for housing payments, especially in expensive and desirable coastal markets. Mortgage rates have fallen about as much as they’re going to fall, and we’re already seeing demand surge back. If supply doesn’t increase as much as demand, price growth is likely to rise.”

To view the full report, including a full methodology and a metro-level summary, please visit: https://www.redfin.com/news/falling-monthly-housing-payments-bay-area

About Redfin

Redfin (www.redfin.com) is a technology-powered real estate company. We help people find a place to live with brokerage, rentals, lending, title insurance, and renovations services. We run the country's #1 real estate brokerage site. Our customers can save thousands in fees while working with a top agent. Our home-buying customers see homes first with on-demand tours, and our lending and title services help them close quickly. Customers selling a home can have our renovations crew fix it up to sell for top dollar. Our rentals business empowers millions nationwide to find apartments and houses for rent. Since launching in 2006, we've saved customers more than $1.6 billion in commissions. We serve more than 100 markets across the U.S. and Canada and employ over 4,000 people.

Redfin’s subsidiaries and affiliated brands include: Bay Equity Home Loans®, Rent.™, Apartment Guide®, Title Forward® and WalkScore®.

For more information or to contact a local Redfin real estate agent, visit www.redfin.com. To learn about housing market trends and download data, visit the Redfin Data Center. To be added to Redfin's press release distribution list, email press@redfin.com. To view Redfin's press center, click here.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240925731333/en/

Redfin Journalist Services:

Kenneth Applewhaite

press@redfin.com

Source: Redfin

FAQ

How much have monthly housing payments dropped in San Jose, CA according to Redfin (RDFN)?

According to Redfin's report, the typical San Jose, CA homebuyer's monthly housing payment has fallen more than $2,000 from its springtime peak, landing at $9,398 in mid-September.

What caused the decrease in monthly housing payments reported by Redfin (RDFN)?

The decrease in monthly housing payments is primarily due to lower mortgage rates, which fell from about 7.2% in late April to 6.1% in mid-September, as well as some decline in home prices from their peak.

Which metro areas saw the largest percentage declines in housing payments according to Redfin's (RDFN) analysis?

According to Redfin's analysis, Oakland saw the largest percentage decline at 19.1%, followed by San Jose at 18.2%, Austin at 14%, Jacksonville at 14%, and Nashville at 13.1%.

What advice does Redfin (RDFN) offer to potential homebuyers based on the current market conditions?

Redfin economists advise potential homebuyers to consider entering the market now, as they believe mortgage rates are unlikely to fall much further and home prices may increase as demand returns.