Falling rates aid home sales

Drop below 5 percent in 30-year loans for mortgages is pushing buyers off the fence

With mortgage rates falling to a four-month low, properties are moving again after an autumn lull, area real estate agents say.

After mortgage rates increased this fall — reaching a seven-year high of about 5 percent in October — real estate agent Angelina Keck watched buyers back out of contracts on new homes as their costs rose. But as mortgage rates have since fallen to a four-month low, properties are moving once again, said Keck.

“You’re seeing people get off the fence,” she said. “I definitely saw a lot more action of houses closing and pending before the end of the year than I usually do.”

The average rate for a 30-year fixed-rate mortgage has fallen by nearly a half-point since early November, sliding to 4.55 percent this week, according to Freddie Mac, the government-sponsored mortgage finance company. As a result, Freddie Mac said, “The drop in mortgage rates should stem or even reverse the slide in home sales that occurred during the second half of 2018.”

Nationally, homes coming under contract fell in November, the 11 consecutive month of year-overyear declines in pending home sales, the National Association of Realtors reported this week. Closed sales of existing homes dropped every month since February until reaching a three-year low in September, the Realtors reported. New home sales fell to a 2 1/2 year low in October, the Commerce Department reported.

In Houston, the slide in home sales was most prominent in Sep--

tember, the same month mortgage rates began rising significantly. The region’s sales fell 6 percent from the previous year, according to the Houston Association of Realtors, although Hurricane Harvey, which moved many closings in August 2017 into September, may have skewed the numbers.

But in November, as mortgage rates began to moderate, Houstonarea home sales rose to outstrip the previous year’s, except for homes in the lowest price bracket.

“Now that rates are back down, people see it as an opportunity to lock in a rate under 5 percent,” said real estate agent Amy Bernstein. “So it helps the market.”

But Greg McBride, chief financial analyst at the financial services company Bankrate, cautioned people not to expect dramatic change in sales from the lower rates. “A pullback in mortgage rates helps,” he said, “but it’s not going to change a sluggish market into a buoyant market.”

McBride pointed out that mortgage rates are still higher than they were a year ago and home prices have risen faster than incomes for several years, leading to an affordability issue that a 4.5 mortgage rate will not solve on its own.

In the meantime, McBride recommended borrowers compare lenders to find the lowest rates possible. “There’s a disparity of rates in the marketplace,” he said. “If you’re shopping around, you can still find rates in the low 4s, which can knock a big chunk off of your payment.”