What lower interest rates mean for homebuyers

Mortgage rates dropped below 6% last week for the first time in years, a sign that some economists believe will trigger a more active and competitive housing market.

As rates peaked near 7.8 percent in October 2023, many homeowners locked into lower rates were averse to selling, and prospective buyers have been wary of the added monthly mortgage costs associated with higher rates. 

An analysis at the time found that renting had become cheaper than buying for most Americans. 

Today’s picture looks different. House prices have risen by 9% since 2023. However, falling interest rates mean that mortgage payments are up by only 7%, compared with a 16% increase for market rents. 

Today, the average property in Philadelphia sells for around $250,000, a mortgage averages $1,400 a month, and the typical rent is $1,900.

Purchasing a home, though, remains unaffordable for many. Prices have outpaced incomes and remain near historic highs. Rising rents, meanwhile, make it more difficult to save.

On this edition of Studio 2, we check in on the state of the housing market with local experts who analyze the Greater Philadelphia region. 

Guests:

• Mike Coleman, realtor and adjunct instructor at Temple University’s Real Estate Institute
• Kevin Gillen, principal research fellow at the Wilbur C. Henderson Real Estate Institute at the LeBow College of Business at Drexel University