The high mortgage rates that have stalled the U.S. real estate market are now falling, with the possibility of a sharp decline by the end of the year. According to Freddie Mac, the 30-year fixed mortgage rate fell to 6.47% for the week ending August 8th, reaching its lowest point in a year.
As inflation slows and the economy cools, expectations are growing that the Federal Reserve (Fed) will cut rates twice by the end of this year. Consequently, Realtor.com predicts further declines in mortgage rates in September and December, which is welcome news for potential homebuyers waiting to enter the market. This rate drop is also encouraging for homeowners looking to sell. Is now the time to list your home? What can we expect?
Below are experts’ predictions on the real estate market after the rate drop.
Easing of the ‘Lock-In Effect’ and Increased Home Sales
According to a recent analysis by Realtor.com, 86% of homeowners have mortgage rates below 6%. Many are reluctant to switch from these low rates to higher ones, leading to hesitation in selling their homes.
Tan Tunador, VP of Atlantic Coast Mortgage, stated, “Home sellers have been sitting on the sidelines, not wanting to give up their COVID-era interest rates.”
However, if rates drop further, this could change.
Danielle Hale, Chief Economist at Realtor.com, says, “The faster rates drop, the less homeowners will be held in place, and we could see both new inventory and more sales.”
Mason Whitehead, Branch Manager at Churchill Mortgage in Dallas, adds, “Going from a 4% rate to 7.5% was unbearable for homeowners, but moving from 4% to 5% or 6% is more tolerable.”
More Buyers Entering the Market
Just as sellers were hesitant to move, buyers were also reluctant to enter the market. However, experts predict that as rates continue to fall, buyers who have been on the fence will jump back in.
Mason Whitehead notes, “When rates drop, I think you will see pent-up demand hit the market again.”
Faster Transactions
Sellers considering listing their homes should prepare now. Tan Tunador from Atlantic Coast Mortgage notes, “Mortgage rates have been improving, and they are bringing potential buyers out early. Sellers listing their houses early may have the opportunity to sell before competition heats up.”
Charlie Dougherty, Chief Economist at Wells Fargo, adds, “Mortgage applications have perked up, and refinancing activity also looks to be picking up as rates go lower and owners carrying elevated mortgage rates seek to reduce their monthly payments.”
Home Prices Likely to Remain High
Despite increased market activity, home prices are expected to remain high. Dan Hnatkovskyy, co-founder and CEO of NewHomesMate, predicts, “Sellers will continue to be in a historically strong position, as the U.S. housing market is still short millions of homes.”
Potential for Multiple Offers
As competition among buyers increases, sellers are likely to receive multiple offers. Bryson Taggart of Opendoor predicts, “When mortgage rates start to drop, sellers will have multiple offers to consider and leverage in negotiations.”
In conclusion, a drop in rates is expected to have a positive impact on the housing market, and sellers should consider reassessing their sales strategies.
If you need more detailed information about the current rate situation, it’s advisable to consult with a local real estate professional or financial advisor.
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