Nearly 89 percent of U.S. homeowners with mortgages have interest rate below 6 percent: Redfin

Mortgage rates below 6% are common among American homeowners. (iStock)

As mortgage rates inch lower towards the 6% mark, the real estate market is cooling. Still, many homeowners still have low interest rates compared to the 6.66% they fell to last week. In fact, nearly 89% of borrowers have an interest rate below 6%, a Redfin study reports.

just over 78% of borrowers have a rate below 5% while 59.5% have a rate below 4%. Those lucky enough to have an interest rate below 3% fall to 22.6% of homeowners, Redfin reports.

With lower mortgage interest rates than current averages, it’s easy to understand why homeowners are weary of selling. However, compared to 2022 when almost 93% of rates were below 6%, it's clear that some homeowners decided to sell anyway.

"I’m working with a lot of homeowners who are selling because of things like divorces, new jobs or deaths in the family," said David Palmer, a Redfin Premier real estate agent in Seattle. "I’m also working with homeowners who are bursting at the seams and selling because they’ve outgrown their current home."

As rates continue to drop, the lock-rate effect that caused sellers to avoid selling the last few years will lessen and more listings will likely appear. Many sellers are also realizing that it’s unlikely rates will drop to their lowest levels any time soon.

"[Sellers are] also coming to terms with the fact that rates aren’t going back down to 3% any time soon, which makes it easier to pull the trigger on selling," Palmer said. "But a lot of sellers are worried about finding their next house because even though listings are rising, there’s still a housing shortage. That’s part of the reason so many sellers remain on the sidelines."

If you’re looking to purchase a home in today’s market, you can explore your mortgage options by visiting Credible to compare rates and lenders and get a mortgage preapproval letter in minutes.


Buying and selling still comes with a steep cost

Homeowners and buyers have experienced some serious whiplash in the last few years when it comes to the housing market. Thankfully, predictions for 2024 show a hopeful trend. Still, that doesn’t mean the buying and selling process is without difficulties.

The average mortgage payment for buyers across the U.S. is $2,399, Redfin reports. That’s down from 2022 when buyers paid about $300 more each month, but it’s far from affordable for many households.

First-time buyers are feeling the brunt of this housing crisis. First-time buyers need to earn at least $64,500 to afford smaller starter homes, according to another Redfin release. This is up by $7,200, or 13% from last year.

Considering that the average yearly salary in the U.S. is about $55,000, buying a starter home isn’t a possibility for many potential homeowners.

For those ready to make the jump and buy a home, securing a low interest rate is one way to save on your monthly payments. A site like Credible can let you view multiple mortgage lenders and provide you with personalized rates within just minutes, all without impacting your credit.


Housing, insurance costs remain high

Although listings are likely to rise in 2024, housing costs are still high. Condos and single-family houses remained unaffordable in Q4 2023, according to an ATTOM report.

Maintaining these homes also comes at a significant cost for owners, with major expenses consuming 33.7% of the average national wage, the ATTOM report shows.

"The good news is that home affordability has stopped getting tougher around the U.S., at least for the moment. The bad news is that owning a home remains more of a financial stretch than it’s been for many years," ATTOM CEO Rob Barber said.

Unlike mortgage interest rates, homeowners insurance rates aren’t trending down. Some states have seen huge hikes in premiums in recent years, and nearly all states have seen premiums rise in general. Assurance IQ released a report at the end of last year showing that 63% of Americans experienced an increase in their homeowners or renters insurance premiums.

Certain states have seen higher hikes than others, particularly those prone to natural disasters like hurricanes and wildfires. Arizona residents are among those dealing with the worst rising premiums, mainly due to an increase in wildfires in recent years.

"Historically, … you plan for, maybe 5% to 10%," said Joe Conner, a homeowner in Arizona, to a local news station. "But to see such a significant jump about 50% of annual premium increase was definitely a shock."

While insurance costs are going home, mortgage rates are going down, thankfully. To take advantage of lowering rates, head to Credible to start your mortgage application process.


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