Friday, July 19, 2024 / by Matthew Lawson
Impending Mortgage Rate Reduction Gives Hope to Better Home Affordability
Mortgage rates have been THE topic in home ownership and affordability over the last 2 and a half years. In January of 2022 rates began a steep incline from historic lows (3.05% in Dec 2021) to historic highs, reaching 7.79% in October 2023. Since October, rates have been relatively unaffected with only slight dips and peaks landing us at 6.77% as of July 18th, 2024.
It's been over 2 years of high mortgage rates and homeowners and would be homeowners alike have been begging for a reprieve. Many who purchased in mid 2022 – 2023 expected to be able to refinance to a lower rate in the matter of 6-10 months, but that time has come and gone without so much as a sign of impending relief. Homeowners who have wanted to sell for the last 3 years have been handcuffed to their mortgages because they’re just too good a of deal to let go. Everyone’s asking, when are rates coming down?
There’s no crystal ball. No genie. No time machine. We do have plenty of speculation and intuition, and just flat out guessing. What really need is the data and cold, hard facts about the market.
INFLATION DATA
Inflation is curbing, reaching ever closer to the 2% FED benchmark set nearly 24 months ago. Although this is great for overall costs, it hasn’t helped that the benchmark has seemed almost impossibly obtainable. Even now still hovering above the benchmark the FED is feeling the pressure to make a move to provide consumers relief from high rates. Inflation has come down and this has allowed time for the markets to correct and stabilize from years of rampant double-digit inflation.
THE HOUSING MARKET: Today
The housing industry hit what many would perceive as a massive slowdown in the wake of high interest rates, but that perception is a bit flawed. In reality the real estate market has remained relatively strong through high interest rates due to three factors: Lack of Inventory, relocation buyers, and location desirability. It hasn’t been until recently, within the last 1-4 months that housing prices locally have begun to correct, but even then, the correction has been minimal at less than 3% overall.
THE HOUSING MARKET: Future
With inflation at near benchmark, and inventory only now starting to rise to more normalized levels there are finally realistic rumblings of an interest rate correction by the FED. It is predicted that by September the FED will begin to reduce the nominal interest rate, likely around .25%, to begin the process of normalizing inflation. With this expected rate reduction, it is anticipated that the real estate market will begin to see a steady flow of buyers returning to the market.
This steady flow is likely to be a bit more like a wave at first thanks to the pent-up demand from the last few years. I’d anticipate that as the first wave of buyers enter the market the inventory levels will dip steeply at first before rising to a level of 2-4 months of inventory. Even then, this would still be considered a sellers’ market and we’ll likely see a more competitive buyer market, although I don’t anticipate it to be as bad as the COVID housing market in ’20 – ’21.
BUYING AND SELLING NOW
If you’re thinking about buying or selling a home right now my best advice is to hire an experienced Realtor to help guide you through the process. We are undoubtedly entering into an unprecedented period of time that only a true professional will be able to guide you properly. We at Briggs American Homes have a full team of experienced brokers ready to help you make your dreams come true. As always if I can help you with your real estate needs in anyway, whether that be buying, selling, investing, renting, or managing your short- or long-term rental, I’m here to help. I can be reached directly at Matt@briggsamerican.com or 980-250-2795.