How the Federal Reserve’s Next Move Could Impact the Housing Market

Now that it’s September, all eyes are on the Federal Reserve (the Fed).

The overwhelming expectation is that they’ll cut the Federal Funds Rate at their upcoming meeting, driven primarily by recent signs that inflation is cooling, and the job market is slowing down. Mark Zandi, Chief Economist at Moody’s Analytics, said:

“They’re ready to cut, just as long as we don’t get an inflation surprise between now and September, which we won’t.”

But what does this mean for the housing market, and more importantly, for you as a potential homebuyer or seller?

Why a Federal Funds Rate Cut Matters

The Federal Funds Rate is one of the key factors that influences mortgage rates – things like the economy, geopolitical uncertainty, and more also have an impact.

When the Fed cuts the Federal Funds Rate, it signals what’s happening in the broader economy, and mortgage rates tend to respond. While a single rate cut might not lead to a dramatic drop in mortgage rates, it could contribute to the gradual decline that’s already happening.

As Mike Fratantoni, Chief Economist at the Mortgage Bankers Association (MBA), points out:

“Once the Fed kicks off a rate-cutting cycle, we do expect that mortgage rates will move somewhat lower.”

And any upcoming Federal Funds Rate cut likely won’t be a one-time event. Lawrence Yun, Chief Economist at the National Association of Realtors (NAR), says:

“Generally, the rate-cutting cycle is not one-and-done. Six to eight rounds of rate cuts all through 2025 look likely.”

The Projected Impact on Mortgage Rates

Here’s what experts in the industry project for mortgage rates through 2025. One contributing factor to this ongoing gradual decline is the anticipated cuts from the Fed. The graph below shows the latest forecasts from Fannie Mae, MBA, NAR, and Wells Fargo (see graph below):

So, with recent improvements in inflation and signs of a cooling job market, a Federal Funds Rate cut is likely to lead to a moderate decline in mortgage rates (shown in the dotted lines). Here are two big reasons why that’s good news for both buyers and sellers:

1. It Helps Alleviate the Lock-In Effect

For current homeowners, lower mortgage rates could help ease the lock-in effect. That’s where people feel stuck within their current home because today’s rates are higher than what they locked in when they bought their current house.

If the fear of losing your low-rate mortgage and facing higher costs has kept you out of the market, a slight reduction in rates could make selling a bit more attractive again. However, this isn’t expected to bring a flood of sellers to the market, as many homeowners may still be cautious about giving up their existing mortgage rate.

2. It Should Boost Buyer Activity

For potential homebuyers, any drop in mortgage rates will provide a more inviting housing market. Lower mortgage rates can reduce the overall cost of homeownership, making it more feasible for you if you’ve been waiting to make a move.

What Should You Do?

While a Federal Funds Rate cut is not expected to lead to drastically lower mortgage rates, it will likely contribute to the gradual decrease that’s already happening.

And while the anticipated rate cut represents a positive shift for the future of the housing market, it’s important to consider your options right now. Jacob Channel, Senior Economist at LendingTree, sums it up well:

“Timing the market is basically impossible. If you’re always waiting for perfect market conditions, you’re going to be waiting forever. Buy now only if it’s a good idea for you.”

Bottom Line

The expected Federal Funds Rate cut, driven by improving inflation and slower job growth, is likely to have a positive, albeit gradual, impact on mortgage rates. That could help unlock opportunities for you. When you’re ready, connect with a local real estate agent so you’re prepared to take action.

Read more at KeepingCurrentMatters.com

Related Links

• Are We Heading into a Balanced Market?

• Tired of Waiting for Lower Mortgage Rates? 4 Steps That Could Slash Your Rate Right Away

• What's the Impact of Presidential Elections on the Housing Market?

If there is a home that you would like more information about, if you are considering selling a property, or if you have questions about the housing market in your neighborhood, please reach out. We’re here to help.

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Are We Heading into a Balanced Market?

If you’ve been keeping an eye on the housing market over the past couple of years, you know sellers have had the upper hand.

But is that going to shift now that inventory is growing? Here’s a breakdown of what you need to know.

What Is a Balanced Market?

A balanced market is generally defined as a market with about a five-to-seven-month supply of homes available for sale. In this type of market, neither buyers nor sellers have a clear advantage. Prices tend to stabilize, and there’s a healthier number of homes to choose from. And after many years when sellers had all the leverage, a more balanced market would be a welcome sight for people looking to move. The question is – is that really where the market is headed?

After starting the year with a three-month supply of homes nationally, inventory has increased to four months. That may not sound like a lot, but it means the market is getting closer to balanced – even though it’s not quite there yet. It’s important to note this increase in inventory is not leading to an oversupply that would cause a crash. Even with the growth lately, there’s still nowhere near enough supply for that to happen.

The graph below uses data from the National Association of Realtors (NAR) to give you an idea of where inventory has been in the past, and where it’s at today:

For now, this is still seller’s market territory – it’s just not as frenzied of a seller’s market as it’s been over the past few years. As Mark Fleming, Chief Economist at First American, says:

“The faster housing supply increases, the more affordability improves and the strength of a seller’s market wanes.”

What This Means for You and Your Move

Here’s how this shift impacts you and the market conditions you’ll face when you move. Lawrence Yun, Chief Economist at NAR, explains:

“Homes are sitting on the market a bit longer, and sellers are receiving fewer offers. More buyers are insisting on home inspections and appraisals, and inventory is definitively rising on a national basis.”

The graphs below use the latest data from NAR and Realtor.com to help show examples of these changes:

Homes Are Sitting on the Market Longer: Since more homes are on the market, they’re not selling quite as fast. For buyers, this means you may have more time to find the right home. For sellers, it’s important to price your house right if you want it to sell. If you don’t, buyers might choose better-priced options.

Sellers Are Receiving Fewer Offers: As a seller, you might need to be more flexible and willing to compromise on price or terms to close the deal. For buyers, you could start to face less intense competition since you have more options to choose from.

Fewer Buyers Are Waiving Inspections: As a buyer, you have more negotiation power now. And that’s why fewer buyers are waiving inspections. For sellers, this means you need to be ready to negotiate and address repair requests to keep the sale moving forward.

How a Real Estate Agent Can Help

But this is just the national picture. The type of market you’re in is going to vary a lot based on how much inventory is available. So, lean on a local real estate agent for insight into how your area stacks up.

Whether you’re buying or selling, understanding how the market is changing gives you a big advantage. Your agent has the latest data and local insights, so you know exactly what’s happening and how to navigate it.

Bottom Line

The real estate market is always changing, and it’s important to stay informed. Whether you’re buying or selling, understanding this shift toward a balanced market can help. If you have any questions or need expert advice, don’t hesitate to reach out to a local real estate agent.

Read more at KeepingCurrentMatters.com

Related Links

• The Number One Mistake Sellers Are Making: Overpricing Their House

• Today’s Biggest Housing Market Myths

• Homebuyers Gear Up for a Mortgage Rate Drop This Fall: What To Know as the Housing Market Shifts

If there is a home that you would like more information about, if you are considering selling a property, or if you have questions about the housing market in your neighborhood, please reach out. We’re here to help.

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Today’s Biggest Housing Market Myths

Have you ever heard the phrase: don’t believe everything you hear?

That’s especially true if you’re thinking about buying or selling a home in today’s housing market. There’s a lot of misinformation out there. And right now, making sure you have someone you can go to for trustworthy information is extra important.

If you partner with a real estate agent, they can clear up some common misconceptions and reassure you by backing them up with research-driven facts. Here are just a few misconceptions they can help disprove.

1. I’ll Get a Better Deal Once Prices Crash

If you’ve heard home prices are going to come crashing down, it’s time to look at what’s actually happening. While prices vary by local market, there’s a lot of data out there from numerous sources that shows a crash is not going to happen. Back in 2008, there was a dramatic oversupply of homes that led to prices crashing. Across the board, there’s an undersupply of homes for sale today. That makes this market a whole different scenario (see chart below):

So, if you think waiting will score you a deal, know that data shows there’s not a crash on the horizon, and waiting isn’t going to pay off the way you’d hoped.

2. I Won’t Be Able To Find Anything To Buy

If this nagging fear about finding the right home if you move is still holding you back, you probably haven’t talked with an expert real estate agent lately. Throughout the year, the supply of homes for sale has grown. Data from Realtor.com helps put this into context. While there are still fewer homes on the market than in a more normal year like 2019, inventory is still above where it was at this time last year (see graph below):

So, if you’re remembering all that media coverage about record-low supply during the pandemic, you can rest a bit easier. While the market isn’t back to normal just yet, inventory is moving in a healthier direction. And that means as your options improve, you can let go of this now outdated myth because finding a home to buy won’t feel quite so impossible anymore.

3. I Have To Wait Until I Have Enough for a 20% Down Payment

Many people still believe you need a 20% down payment to buy a home. To show just how widespread this myth is, Fannie Mae says:

“Approximately 90% of consumers overstate or don’t know the minimum required down payment for a typical mortgage.”

And if you look at the data from the National Association of Realtors (NAR), you can see the typical homeowner isn’t putting down as much as you might expect (see graph below):

First-time homebuyers are typically only putting down 6%. That’s far less than the 20% so many people think they need. And if you’re looking at that graph and you’re more focused on how the number for repeat buyers is closer to 20%, here’s what you need to realize. That’s only because they have so much equity built up in their current house that can be used to make a larger down payment for their next move.

This goes to show you don’t have to put 20% down, unless it’s specified by your loan type or lender. Many people put down a lot less. Not to mention, depending on the type of home loan you get, you may only need to put 3.5% or even 0% down. So, if you’re buying your first home, you likely don’t need nearly as much for your down payment as you may think.

An Agent’s Role in Fighting Misconceptions

If you put your move on pause because you heard one or more of these myths yourself, it’s time to talk to a trusted agent. An expert agent has more data and the facts, just like this, to reassure you and help break through any misconceptions that may be holding you back.

Bottom Line

If you have questions about what you’re hearing or reading, connect with a real estate agent. You deserve to have someone you can trust to get the facts.

Read more at KeepingCurrentMatters.com

Related Links

• The Number One Mistake Sellers Are Making: Overpricing Their House

• The Great Wealth Transfer: A New Era of Opportunity

• Homebuyers Gear Up for a Mortgage Rate Drop This Fall: What To Know as the Housing Market Shifts

If there is a home that you would like more information about, if you are considering selling a property, or if you have questions about the housing market in your neighborhood, please reach out. We’re here to help.

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Are home sellers finally coming back to the market?

The defining characteristic of the 2023 housing market has been dramatically fewer home sellers than any recent year.

That’s one reason total sales volume has been so low, but it looks now like that’s starting to change.

The inventory picture

There are now 539,000 single-family homes on the market unsold, which is up 3.2% than last year at this time. Housing inventory climbed late in the year as mortgage rates rose. Rates are falling now and if that continues, buyers will jump and inventory will fall well into the first quarter of 2024.

Could we see new inventory from distressed sellers if we see a deep recession? Yes, demand will slow if unemployment climbs, but it’s probably 2025 before we see the bulk of that.

More home sellers enter the market

There were 11% more new sellers this week than last year at this time. All year there have been 10-20-30% fewer sellers, so the tide is starting to turn. These sellers have been matched by an increase in buyers, too, so there were 10% more immediate sales than last year. 

As of now, there are no signs of increased sellers growing out of balance with the number of buyers. There are still far fewer sellers each week than in the pre-pandemic era.

Contracts growing

We continue to see the new contracts grow each week: There were 7.7% more new contracts started this week than the same week a year ago. The market was contracting all the way until October, but is now reliably expanding. This is growth of very low numbers: This isn’t a boom market, of course, but it’s a turn.

Home prices will finish the year up 2-3%

Home prices will finish 2023 with 2%-3% gains over last year. The median price of single-family homes in the U.S. is now $420,000. The leading indicators here show another year of flat home-price change in 2024.

The price reductions data tells us that while demand is still weak, it’s better than last year at this time. We had 37.6% of the homes on the market get a price cut this week, which is still above normal, but should drop into the normal range in January. 

What will the housing market look like in 2024? If mortgage rates were to plummet early in the year, buyers would jump in quickly, inventory would drop and competition would push prices higher. That’s a big if. On the other hand, price reductions show enough weakness that if supply were to surge, prices would correct down very quickly. Supply isn’t surging, but it’s worth watching.

Read more at HousingWire.com

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• 3 Valuable Lessons for Anyone Entering Their Homeowner Era in 2024

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• Mortgage refinance demand jumps 19% after rates hit lowest level since July

If there is a home that you would like more information about, if you are considering selling a property, or if you have questions about the housing market in your neighborhood, please reach out. We’re here to help.

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A Real Estate Agent Helps Take the Fear Out of the Market

Do negative headlines and talk on social media have you feeling worried about the housing market?

Maybe you’ve even seen or heard something lately that scares you and makes you wonder if you should still buy or sell a home right now.

Regrettably, when news in the media isn’t easy to understand, it can make people feel scared and unsure. Similarly, negative talk on social media spreads fast and creates fear. As Jason Lewris, Co-Founder and Chief Data Officer at Parcl, says:

“In the absence of trustworthy, up-to-date information, real estate decisions are increasingly being driven by fear, uncertainty, and doubt.”

But it doesn’t have to be that way. Buying a home is a big decision, and it should be one you feel confident making. You should lean on a trusted real estate agent to help you separate fact from fiction and get the answers you need.

That agent will use their knowledge of what’s really happening with home prices, housing supply, expert forecasts, and more to give you the best possible advice. The National Association of Realtors (NAR) explains:

“. . . agents combat uncertainty and fear with a combination of historical perspective, training and facts.”

The right agent will help you figure out what’s going on at the national level and in your local area.

They’ll debunk headlines using data you can trust. Plus, they have in-depth knowledge of the industry and can provide context, so you know how current trends compare to the normal ebbs and flows in the housing market, historical data, and more.

Then, to make sure you have the full picture, an agent can tell you if your local area is following the national trend or if they’re seeing something different in your market. Together, you can use all that information to make the best possible decision.

After all, making a move is a potentially life-changing milestone. It should be something you feel ready for and excited about. And that’s where a trusted expert comes in.

Bottom Line

If you need reliable information about the housing market and expert advice about your own move, get in touch with a real estate agent in your area.

Learn more at Keepingcurrentmatters.com

Related Links

• The Hottest Housing Season Isn’t Behind Us: These Are the 7 Best Cities To Buy a Home this Fall

• Affordable Homeownership Strategies for Gen Z

• The Perks of Selling Your House When Inventory Is Low

If there is a home that you would like more information about, if you are considering selling a property, or if you have questions about the housing market in your neighborhood, please reach out. We’re here to help.

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