(NBC) – Falling mortgage rates are helping more house hunters make the math work on a monthly payment. The average rate on the 30-year fixed has fallen steadily since April, lowering the monthly payment on every home for sale.
But lower rates are also bringing out more buyers, fueling competition yet again just as fast-rising home prices were finally slowing down.
“The recent drop in the 30-year mortgage rate gives us a little bit of a reason to believe that this slowdown won’t last very long,” says Skylar Olsen of Zillow.
In fact, price gains are suddenly widening again.
The median price of a home sold in May rose 3.6 percent annually, the largest jump in seven months, according to Redfin.
Prices are gaining the most steam on the low end of the market, where supply is leanest.
Builders are of little help there. Housing starts dropped over 12 percent annually in May and permits were lower as well.
What the builders are putting up is largely on the higher end, as they battle high costs for land, labor and regulatory compliance.
“The only issue is that as rates go down you still have low inventory and that’s going to limit sales, so prices are going to go up, sales will not be as strong,” says Glenn Kelman with Redfin.
The supply of existing homes for sale was gaining but is now shrinking again, especially for affordable homes.
Part of that is due to increased investor demand.
At the end of last year investors made up over 11 percent of home purchases, the highest rate since CoreLogic began tracking in 1999.
For regular buyers, the sting of higher prices, and the increasing competition from all cash investors are both negating the benefit of lower mortgage rates and taking the heat out of what some thought might be a hot summer for housing.Grab the FREE WDTN News App from the Apple Store or Google play. Stay up to date with all the local news, weather and sports as well as live newscasts and events as they happen.