Non-farm employment is bleak, and U.S. mortgage rates have seen the largest single-day drop in over a year, falling to a nearly one-year low

After the U.S. non-farm payroll report for August fell far short of expectations, according to Mortgage News Daily, the average rate for a 30-year fixed mortgage in the U.S. dropped by 16 basis points to 6.29% on Friday. This is the lowest level since October 3 of last year and the largest single-day decline since August 2024. Following Friday's significant drop, this key mortgage rate finally fell below the 6% high range that had been stuck for several months.

Matt Graham, Chief Operating Officer of Mortgage News Daily, stated, "This is a fairly direct reaction to the highly anticipated employment report. It serves as a good reminder that, in terms of economic data, it is the market that determines what is important, and the clear voting record of the bond market indicates that employment reports are always the biggest potential source of interest rate fluctuations."

Graham also posted on the X platform that many lenders are now offering better pricing than on October 3, with rates in the high 5% range.

This decline stands in stark contrast to the situation in May of this year when the 30-year fixed rate peaked at 7.08%. For buyers currently looking to purchase homes, this is undoubtedly a significant change, especially in the context of persistently high home prices.

For example, if someone buys a home for $450,000 (slightly above the national median home price in August), pays a 20% down payment, and takes out a 30-year loan (excluding taxes and insurance):

• At a 7% interest rate, the monthly payment would be $2,395;
• At a 6.29% interest rate, the monthly payment would be $2,226;
• The difference is $169/month. For some, this may not sound like much, but it could mean the difference between being able to afford a home and qualifying for a loan.

Homebuilder stocks reacted positively on Friday, with companies like Lennar, DR Horton, and Pulte all rising about 3% during the trading session. The homebuilder ETF ITB has performed strongly over the past month, with an increase of nearly 13% as rates gradually decline.

Previously, 13F filings released in mid-August showed that Warren Buffett's Berkshire Hathaway made new investments in U.S. homebuilder Lennar and one of the largest real estate developers in the U.S., D.R. Horton, in the second quarter. These two real estate stocks were not disclosed in the first quarter 13-F report submitted in May, making them "mystery holdings" that the market is paying attention to.

Among them, real estate stock Lennar (LEN) was purchased by Berkshire for approximately 7.05 million shares, with a market value of about $780 million at the end of the quarter, accounting for 0.3% of the portfolio and ranking 26th; Berkshire bought over 1.48 million shares of D.R. Horton (DHI), with a market value of about $191 million at the end of the quarter, accounting for 0.07% of the portfolio.

Analysts point out that the biggest question is whether this decline in mortgage rates is sufficient to bring buyers back to the market Leading indicators of mortgage loan demand have yet to respond to the gradually improving interest rates. According to data from the Mortgage Bankers Association, mortgage applications for home purchases were down 6.6% from four weeks ago.

Danielle Hale, Chief Economist at Realtor.com, stated after the release of the August non-farm payroll report: "Homebuyers are struggling with affordability, sellers are facing more intense competition, and builders are dealing with declining demand. These conditions have not led to disaster, but they have certainly made for a brutal summer in the real estate market."

Some analysts believe that only when mortgage rates drop to the 5% range will there be a substantial impact on buyers. Home prices remain stubbornly high, and although the rate of increase has clearly cooled, there has not been a real decline nationwide in the United States. Additionally, uncertainty regarding the economy and job market has kept many potential buyers on the sidelines.

Risk Warning and Disclaimer

The market carries risks, and investment should be approached with caution. This article does not constitute personal investment advice and does not take into account the specific investment goals, financial situation, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article are suitable for their specific circumstances. Investment based on this is at one's own risk