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As many of you probably heard, the Fed dropped interest rates a week ago, likely leading to lower mortgage rates in the coming months. Even though the Fed rate and mortgage rates are not directly tied together, they commonly move in the same general direction. So, what does this mean for our local real estate market? Although we can never be 100% confident of what the future will bring as unexpected things can always present themselves, barring some major unforeseen event, we'll take a swing at what we think the next 6-12 months hold for our local market. Read on as we do a bit of speculation and tell you our current read on the market. The short version is that we anticipate a gradual and persistent drop in mortgage rates over the next six months. This, along with the completion of the upcoming election, which typically stalls some market activity, will invigorate the market in the late winter and ensuing spring months as buyers and sellers take advantage of the best mortgage rates we have seen in a couple of years. How soon will we see these changes? Although we've already seen the first rate drop, and many experts project that we will see mortgage rates in the 5's (currently 6.2%) before the end of the year, there hasn't yet been a rush for homes. Market changes take some time as buyers must first process a change and then re-enter the market, get pre-approved with a lender, find a Realtor they like, and get their financial ducks in a row before getting out to see homes. So, we expect that there will be some early adopters that start in Q4 of this year to stay ahead of a potential rush in spring, and then the buyer pool will gradually grow as mortgage rates come down and affordability improves into Q1 and Q2 of next year. Showing Data: We compared weekly showing data on a few zip codes and price ranges to see if buyers are already entering the market en masse. We haven't seen the data supporting that; however, it may be just around the corner. The News: The real estate market, like most markets, has much to do with sentiment and vibes. For many buyers and sellers to re-enter the market, not only must mortgage rates come down, but the news and sentiment around the market need to change. Throughout the middle of this year, most news articles about the real estate market have highlighted affordability issues and that it's cheaper to rent than buy in most major cities. However, with a renewed belief that interest rates will likely fall in the weeks and months to come, we are starting to see news headlines turn around. As the news turns around, it will help the belief that it may be a good time to buy. The Election's Impact: There is also quite a bit of distraction and uncertainty from consumers in a presidential election year. Vice President Harris has talked of a $25K first time home buyer credit. If she wins the election and can pass the necessary legislation, those credits would likely persuade many buyers back into the market. We have not heard a similar plan from President Trump, but as we know, plans and proposals are still in flux, so this could change. As we move past election day, a renewed sense of certainty will likely return to the market. Timing the trough: For anyone interested in trying to time the market, there's a good argument that the next six months will be the prime buying moment. We have seen buyer activity slow during the late summer months, putting downward pressure on home prices. The trough for home prices may be just about now, and as we start to see rates come down, those prices may start to tick back up. Whether that happens this fall or not until next spring remains to be seen. We bet that the next couple of months holds opportunities for home buyers who may be willing to make the leap prior to the spring selling season. There may very well be a sweet spot here as rates continue to fall and home prices aren't yet ascending. It might be time for a Re-Finance: Lastly, it's also worth noting that if you purchased a home in the last two years and used a mortgage, you might consider contacting your lender to determine if a refinance makes sense. Mike Echery with Greenlight Mortgage Group told us that he has found many of his recent past clients are in a good spot for a refinance. He said the rates move quickly at times, so it's worth getting your financial documents organized and ready to go with your lender in case favorable rates present themselves in the next few months.
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Until next time! Allison and Ken |
