Refinancing activity is up, but buyers are playing the waiting game. Mortgage rates ticked down for the third week in a row, but buyers are taking their time before they jump in.
The 30-year fixed-rate mortgage averaged 6.08% as of Sept. 26. That’s the lowest level since mid-September 2022. The rate is down 1 basis point from the previous week. [One basis point is equal to one hundredth of a percentage point or 1%). A year ago, the 30-year rate was averaging 7.31%.
The average rate on the 15-year mortgage was 5.16%, up from 5.15% last week. The 15-year rate was at 6.72% a year ago.
This information came from Freddie Mac, whose weekly report on mortgage rates is based on thousands of applications received from lenders across the country that are submitted to Freddie Mac when a borrower applies for a mortgage.
The big picture ~
Mortgage rates are 123 basis points lower than they were a year ago, but those most excited by the news and motivated to act are homeowners who recently bought homes when rates were over the current 6%. Refinancing activity appears to be on the cusp of a massive surge if rates go lower.
Home buyers are still ‘dribbling in’, as seen by recent data from contract signings in August, but they’ve yet to make a big come back.
Nonetheless, industry data sources suggest that home-buying activity could pick up very soon. Touring activity, a proxy for home-buying interest, is up 8% from the start of the year. Rate cuts have sparked more showings; we’re seeing all of our listings in the area get more traffic.
Recommendation ~ If you are considering buying a home, you should start seriously looking now before all the potential buyers waiting on the sidelines re-enter the market.
In other news, the IRS has finally issued rules on inherited IRAs for non-spouse beneficiaries.
Due to the original SECURE Act, most beneficiaries can no longer “stretch” distributions over their lifetimes. Instead, many non-spouse beneficiaries who inherited IRAs on or after Jan. 1, 2020, must empty the account within 10 years of the account owner’s death.
- Update: IRS issued final regulations 7/2024 on inherited IRAs confirming that beginning January 2025, these beneficiaries will face annual required distributions during the remainder of the 10-year window.
- Example – If a non-spouse inherited an IRA in 2020 and has taken no distributions, they have until 2030 for the account to be $0. Starting 1/1/2025 they will need to withdraw the entire IRA value over FIVE years (or 1/5 each year), so the account value is $0 by 12/31/2030.
Under the final IRS rules, issued in mid-July, for some, it’s not as simple as waiting until the tenth year to withdraw all the funds in the inherited IRA account.
For many heirs, the IRS now requires annual withdrawals throughout the 10 years. (The RMD amount each year can vary based on several factors, including the beneficiary’s age, relationship to the deceased, and the value of the inherited account.)
Rules differ depending on whether the original account owner, before they passed away, had begun taking RMDs. If they took required distributions before they died, the beneficiary usually needs to continue taking annual distributions while complying with the 10-year rule (if applicable).
A bit of good news…
It’s important to note that the IRS has delayed implementation of the final rules governing inherited IRA RMDs — until 2025. This means some beneficiaries of inherited IRAs have had more time to adapt to distribution requirements.
The IRS will waive penalties for RMDs missed in 2024 from IRAs inherited in 2023, where the deceased owner was already subject to RMDs. (With previous IRS relief, penalties are waived for missed RMDs from specific IRAs inherited in 2020-2023.)
Recommendation – for those who inherited a non-spouse IRA after 1/1/2020, you will need to withdraw RMDs annually starting 1/2025 staying WITHIN the 10-year withdrawal window.