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Mortgage applications were up to their highest point in more than two years following the Federal Reserve's 50-basis-point rate cut on Sept. 18, as the Mortgage Bankers Association's Market Composite Index rose 11% from the week ending Sept. 13. But with the first interest rate drop in roughly four years, what does this market volatility mean for housing affordability?
Rates were declining towards the 6% benchmark in advance of the Federal Open Market Committee's decision this month. The 30-year fixed-rate mortgage dropped to 6.09% on Sept. 19, down 11 basis points from the prior week; it dropped another basis point on Thursday according to data from the Freddie Mac Primary Mortgage Market Survey.
"Long-term mortgage rates will fall if economic data indicates a weakening economy," Melissa Cohn, regional vice president at William Raveis Mortgage, said to National Mortgage News' Brad Finkelstein. "Employment numbers will be key."
Read more: Why mortgage rates might rise after Fed cut
While applications were up, home sales were more mixed.
Data from the National Association of Realtors found that sales of existing homes in the U.S. were down 2.5% from the month prior, to a seasonally adjusted annual rate of 3.86 million. This figure was 4.2% lower year over year.
New home construction was up, however, as optimism among builders rose before the FOMC meeting. Recent statistics for August released by the U.S. Census Bureau and the U.S. Department of Housing and Urban Development found that privately owned housing starts were at a 1.36 million annual rate adjusted seasonally, up 9.6% from the month prior.
Mark Fleming, chief economist at First American, told National Mortgage News that even with the growing for-sale inventory, high housing prices and mortgage rates are constricting demand.
Read more: Slowing price growth might not move home sales
"Sluggish demand combined with increasing supply is a recipe for cooling home price appreciation," Fleming said.
Read on to learn more about which cities are the most opportune for buyers at different points in their lives and how the elevated interest rate environment has impacted their housing markets.
