The 15-year fixed-rate mortgage also fell eight basis points to an average of 2.46%. The 5-year Treasury-indexed hybrid adjustable-rate mortgage remained at 2.91% on average.
Low mortgage rates have provided incentives to would-be buyers, prompting home sales to hit volumes last seen prior to the Great Recession. But today’s home buyers aren’t necessarily scoring a deal when compared with last year’s cohort of buyers.
This time last year, the 30-year fixed-rate mortgage averaged 3.58%. But someone who buys the typical listing today will be paying $14 higher monthly mortgage payments than someone who purchased a property last summer, according to data from Realtor.com.
“Lower mortgage rates can’t completely offset higher costs,” said Danielle Hale, chief economist at Realtor.com.
When rates drop, affordability improves for a period of time. But as history has shown, low rates eventually coax more people into the housing market. That creates competition for homes, which drives prices upward.
Currently, median listing prices are 10.3% higher than a year ago, according to Realtor.com. Meanwhile, the low supply of homes for sale has meant that properties are coming off the market in record time. That increases the likelihood that a given buyer will face a bidding war, which can increase how much they must spend to get the keys to their dream home.
Ultimately, today’s home buyers may discover that low mortgage rates are a double-edged sword.
One piece of good news for buyers though: While rates remain incredibly low, refinancing is becoming less attractive to existing homeowners, Hale said. “This may paradoxically help buyers as they won’t have to compete with as many refinance applicants for lender attention,” she said.