The Federal Reserve announced this week they would make cuts to interest rate levels for the first time since March 2020. It marks a major turning point for homebuyers, particularly, after nearly two years of high mortgage rates and a significant slowdown in housing market activity.
If you're in the market to buy a home or looking to refinance, this rate cut could be the opportunity you've been waiting for.
Over the past two years, the Federal Reserve raised interest rates multiple times in response to rising inflation. This had an effect on mortgage rates, which shot up to around 6.5-7.5%, pushing monthly payments beyond what many buyers could afford .
However, with inflation easing and the job market cooling, the Fed is now shifting gears, lowering rates to help stimulate economic activity.
The Fed’s interest rate decision is expected to put downward pressure on mortgage rates, though the effects won’t be immediate.
Historically, when the Fed cuts rates, mortgage rates tend to follow gradually. With the average 30-year fixed mortgage rate sitting at about 6.2%, experts are anticipating seeing this number drop into the 5% range as we head into 2025. The recent reduction in rates has increased affordability and purchasing power over the past year
“With lower rates, the monthly payment on a $400,000 home has fallen $250 per month compared to September 2023,” said Nick Erickson, executive director of Housing Affordability Institute.
While lower mortgage rates can make homes more affordable in terms of monthly payments, supply issues remain a challenge. Over the past two years, many homeowners who locked in low mortgage rates during the pandemic chose not to sell, leading to a shortage of homes on the market.
The good news? A lower rate environment could spur more sellers to list their homes, and developers may feel more confident to start new projects. But for now, inventory remains tight in many regions, which could keep home prices high despite lower mortgage rates .
Many builders are working to address the supply shortage by building new homes to balance the market. Events like the Parade of Homes are the perfect time to explore new home options that fit your budget and needs.
If you're considering buying a home, it may be a good time to start preparing. Lower interest rates could provide more buying power, but demand is likely to increase as more buyers return to the market.
Here are a few tips to help you take advantage of the rate cut:
A house has become so much more this year. It is a sanctuary, a safe place, a salon, a school, a chef's domain, and more. Owning a home builds self-esteem, wealth, and even communities. A house is a place where life happens with all the messy beauty and real love that goes with it. We need to build more houses so more people can benefit, because homeownership is all of it, but it is not attainable for everyone.
Homeownership is all of it. Home is a headquarters. Home is healing. Home is love.
The Parade of Homes has a proud legacy of providing homeownership opportunities in our state. In our continued commitment to expanding the opportunity for homeownership for everyone, everywhere in our state, we’re pleased to launch the Parade of Homes First-Time Homebuyer $10K Giveaway!
