As 30-year fixed mortgage rates continue to plummet in the United States, many existing homeowners are taking advantage of the trend by joining the wave of refinancing.
Even with larger economic forces raising concerns about the U.S. economy, the housing market continues to broadly offer investment and savings opportunities that haven’t been around since November 2016 — the last time mortgage rates fell below 3.6%.
But there is a bit of a problem for first-time homebuyers, according to a new analysis by Bloomberg. There aren’t enough houses available in their price range:
While the drop in borrowing costs should be making purchases more affordable, competition is only heating up for entry-level properties, driving prices further out of reach. Buyers of pricier homes can more easily take advantage of low rates because they have access to a deeper pool of inventory.Prashant Gopal for Bloomberg
The report notes that sales of previously-owned homes hit a five-month high in July, rebounding from lower sales numbers earlier in the year. Yet purchases of homes valued at $100,000 or lower fell by 10% compared to the previous year.
Notably, the supply of houses priced under $200,000 also dropped by about 10% compared to last July. There simply aren’t enough starter homes to go around for many aspiring homeowners to take advantage of the lower mortgage rates.
This is a dilemma that will likely be a challenge to solve. Ideally, the current market would work for the benefit of those who want to own property for the first time. With newer construction favoring more luxurious homes, the availability of modest properties is becoming more scarce.
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