The decline in mortgage rates over the last month likely will boost U.S. home sales by more than 200,000 as cheaper financing results in more people qualifying for loans, according to Lawerence Yun, chief economist of the National Association of Realtors.
"Each half a percentage point drop in mortgage rates results is an additional 200,000 home sales, and likely even more," said Yun. "Since more people will qualify for mortgages, it leads to more sales."
The average U.S. rate for a 30-year fixed home loan dropped to 6.28% last week from 6.73% in March's first week, according to Freddie Mac. That decline in the cost of financing reduces monthly payments, meaning more buyers will pass the debt-to-income test lenders use to qualify applications.
"Lower mortgage rates open the gate – not for everyone, but for people who were on the margins," Yun said.
Mortgage rates likely will remain near the current level in the short term and decline further in the coming months, Yun said. The average U.S. rate for a 30-year fixed mortgage probably will be 6.3% in the second quarter and 5.9% in the third quarter, he said.
About 40% of U.S. home sales go under contract in the April to June period, according to data from NAR. Those sales typically close about two months later, with the buyers moving in the summer months.