In a positive development for America's housing market, mortgage rates have continued their downward trend this week, providing some relief to potential buyers. The Federal Reserve's efforts to maintain economic stability have played a crucial role in this decline.

According to Freddie Mac, the standard 30-year fixed-rate mortgage averaged 6.09% in the week ending September 19, dropping from the previous week's 6.20%. Moreover, this rate is significantly lower than last fall's peak of 7.79%, marking the lowest level since early February 2023.

Lower mortgage rates have significant implications for housing affordability, offering hope to those patiently waiting on the sidelines. However, a recent report released by the National Association of Realtors revealed that sales of previously owned homes in the United States saw a sharp decline in August, despite the plummeting mortgage rates during that month.

Nevertheless, the consistent decline in mortgage rates is expected to unleash a surge in housing demand. This anticipation comes after the Federal Reserve's recent decision to cut interest rates for the first time in four years, with hints of further rate cuts by the end of the year.

In August, existing home sales, which account for the majority of the market, slumped 2.5% from the previous month, reaching a seasonally adjusted annual rate of 3.86 million. This is the lowest level of August sales since 2010. Meanwhile, home prices continued their ascent, with the median price of an existing home rising 3.1% to $416,700 – a record for August home prices and the 14th consecutive year-over-year increase.

Despite disappointing home sales in August, Lawrence Yun, chief economist at the National Association of Realtors, remains optimistic about the future prospects of the market. Yun emphasized the potential impact of lower mortgage rates combined with an increasing inventory, envisioning a favorable environment for sales to rise in the coming months.

While borrowing costs have surged and housing shortages have plagued the market in recent years, making it increasingly challenging for many Americans to purchase homes, the Fed's recent rate cut offers hope for a revitalized housing market.

As the Fed plans to further reduce interest rates throughout the year, it is highly likely that mortgage rates will continue to decline. However, the extent of this decline will depend on economic data, specifically indicating the Fed's inclination towards further rate cuts.

Although the Fed does not directly control mortgage rates, its actions significantly influence them through fluctuations in bond yields. Mortgage rates closely follow the 10-year US Treasury yield, which responds to the Fed's rate decisions. For instance, weaker-than-expected payroll growth and rising unemployment in July caused yields to tumble, as it signaled an imminent rate cut by the Fed.

According to Daniele Hale, chief economist at Realtor.com, those who have waited patiently to enter the market may find themselves in a favorable position. Not only have mortgage rates continued to decrease into early September, but seasonal trends also indicate a decline in competition, ease in home prices, and longer time on the market – all beneficial factors for potential homebuyers.

Although it may take three to four months for the effects of lower mortgage rates to be fully realized, Yun suggests that by October, the demand for housing is likely to witness a significant boost. The process of informing landlords and searching for a new home, especially for first-time buyers, usually takes some time.

As the saga unfolds, it remains crucial to monitor the evolving dynamics of the housing market. The combination of declining mortgage rates, increasing inventory, and favorable market conditions creates a promising landscape for buyers, signaling the potential for a housing market rebound.

Please note that this is an ongoing story, and further updates will follow.