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.

Search Homes in Colorado

Search Homes in North Carolina

Search Homes in Oklahoma

Search Homes in Oregon

Search Homes in Minnesota

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

It’s no surprise that the upcoming Presidential election might have you speculating about what’s ahead.

And those unanswered thoughts can quickly spiral, causing fear and uncertainty to swirl through your mind. So, if you’ve been considering buying or selling a home this year, you’re probably curious about what the election might mean for the housing market – and if it’s still a good time to make your move.

Here’s the good news that may surprise you: typically, Presidential elections have only had a small, temporary impact on the housing market. But your questions are definitely worth answering, so you don’t have to pause your plans in the meantime.

Here’s a look at decades of data that shows exactly what’s happened to home sales, prices, and mortgage rates in previous Presidential election cycles, so you can move forward with the facts as you weigh the pros and cons of your homeownership decision.

Home Sales

In the month leading up to a Presidential election, from October to November, there’s typically a slight slowdown in home sales (see graph below):

Some consumers will simply wait it out before they make their purchase decision. However, it’s important to know this slowdown is small and temporary.

Historically, home sales bounce right back and continue to rise the following year.

In fact, data from the Department of Housing and Urban Development (HUD) and the National Association of Realtors (NAR) shows after 9 of the last 11 Presidential elections, home sales went up the year after the election, and it’s been happening consistently since the early 1990s (see chart below):

Home Prices

You may also be wondering about home prices. Do prices come down during election years? Not typically. As residential appraiser and housing analyst Ryan Lundquist notes:

“An election year doesn’t alter the price trend that is already happening in the market.”

Home prices generally rise over time, regardless of an election cycle. So, based on what history shows, you can expect the current pricing trend in your local market to likely continue, barring any unusual market or economic circumstances.

The latest data from NAR reveals that after 7 of the last 8 Presidential elections, home prices increased the following year (see chart below):

The one outlier was from 2008 to 2009, which was during the height of the housing market crash. That was certainly not a typical year. Today’s market, however, is much more resilient. And while prices are moderating nationally, they aren’t on an overall decline.

Mortgage Rates

And the third thing that’s likely on your mind is mortgage rates, since they impact your monthly payment if you’re financing a home. Looking at the last 11 Presidential election years, data from Freddie Mac shows mortgage rates decreased from July to November in 8 of them (see chart below):

And this year, we’ve already started to see that happen. Most experts also forecast mortgage rates will ease slightly throughout the rest of 2024. If that happens – and all signs right now indicate it should – this year will continue to follow the trend of declining rates. So, if you’re looking to buy a home in the coming months, this could be great news for your purchasing power.

What This Means for You

What’s the big takeaway? While Presidential elections do have some impact on the housing market, the effects are usually minimal. As Lisa Sturtevant, Chief Economist at Bright MLS, says:

“Historically, the housing market doesn’t tend to look very different in presidential election years compared to other years.”

For most buyers and sellers, elections don’t have a major impact on their plans.

Bottom Line

While it’s natural to feel a bit uncertain during an election year, history shows the housing market remains strong and resilient. And this means you don’t have to pause your plans in the meantime. For help navigating the market during this election cycle, reach out to a local real estate agent. 

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

• How Much Does It Cost To Renovate a House? Average Home Renovation Costs for Bathrooms, Kitchens, and Beyond

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.

Search Homes in Colorado

Search Homes in North Carolina

Search Homes in Oklahoma

Search Homes in Oregon

Search Homes in Minnesota

How Much Does It Cost To Renovate a House? Average Home Renovation Costs for Bathrooms, Kitchens, and Beyond

Home renovations and remodeling costs may be a hard pill to swallow after shelling out the purchase price of a new home, but if you’re the proud homeowner of a fixer-upper (or even if you’re the proud owner of an older home that needs some work), you may be itching to make some updates.

And that will get you wondering: How much does it cost to renovate a house? Knowing your numbers ahead of time is crucial, lest you end up with plans that are bigger than your budget.

So, before you so much as take a peek at a tile sample, check out this detailed breakdown on how much your dream home renovation will set you back, plus average home renovation costs and your potential return on investment (ROI).

Average home renovation costs

Your exact cost to renovate a house will depend on its square feet, the region you live in, and just how much of a face-lift your home needs. But to get a rough idea, Than Merrill, founder of FortuneBuilders.com, gave us an estimate of what the average costs associated with different remodels look like:

• Low ($25,000 to $45,000): A small remodel would likely include interior and exterior painting, small repairs (like refinishing cabinets) and new landscaping.

• Medium ($46,000 to $75,000): A more involved remodel would include the low-cost upgrades above, plus a total kitchen remodel (depending on appliances) and minor bathroom remodel.

• High ($76,000 and up): Low- and medium-cost upgrades, plus fixing any foundation issues, and roof and sewer line problems.

The largest home renovation costs

Sure, paint can play a big part in a remodel, but gallons of semi-gloss will be a drop in the bucket compared with big-ticket items for certain rooms (we’re looking at you, kitchen and bathroom).

Remember, it’s the appliances and cabinets in those rooms that eat up the biggest chunk of money. Here’s what homeowners can expect to pay in terms of the national average of home renovation costs, according to Remodeling.com and HomeAdvisor.com.

• Kitchen: The national average cost of a kitchen remodel is $27,492. If a kitchen only needs minor upgrades, renovations should start at around $10,000. A full gut can reach more than $79,982, depending on the quality of materials and appliances installed.

• Bathroom: A mid-range bathroom remodel typically costs about $25,251 and tops out at $78,840 for an upscale reno. (Of course, you could spend more by adding such spalike touches as a steam shower.)

• New roof: The cost of protecting all your upgrades from the elements will run you around $30,680.

• New floors: You might want to top off your renovation by taking up that old carpet. Installing new wood floors will cost between $2,474 and $7,031, while laminate, which is less expensive, will set you back about between $1,472 and $4,638. Of course, exact cost will depend on how many square feet you have in the kitchen.

• Electrical updates: If you’re replacing an old panel (and a home’s worth of outdated wiring) as a part of your remodel, expect to spend $3,000 to $5,000.

• Replacement siding: Any great remodel includes an exterior upgrade. Putting new exterior siding on your home runs to an average of $20,619.

• Replacement windows: If you plan to replace windows and frames to save on your energy bill (you might need the savings after this renovation), the cost will range between $21,264 (vinyl) and $25,799 (wood).

• The contractor: Unless you plan to oversee the renovation yourself, a budget should include the cost of a general contractor. They usually charge 10% to 15% of the project’s total budget. So for a $50,000 renovation, expect to pay a contractor $5,000 to $7,500.

One easy way for homeowners to save money on home renovations is to negotiate to pay actual builder costs on finish materials, says Jesse Fowler, president of Tellus Build, a green custom-build firm in Los Angeles and Santa Barbara counties.

The contractor you choose should be getting a discount on retail prices, and Fowler says that this can benefit you, too, in that you can “capture some or all of those savings.”

Home renovation costs and return on investment (ROI)

Ah, the magic words that make homeowner’s pain of parting with thousands of dollars more palatable, as those big checks you write for home renovation costs today may pay dividends if you ever sell your home.

A typical mid-range kitchen remodel typically yields an 96% return on investment. If you plan to go big with a major, upscale remodel however, you can only expect a 49% ROI.

Meanwhile, a mid-range bathroom renovation boasts an ROI of 74.%, with that figure dropping to 45% for an upscale remodel. Check here for the home additions that offer the best return on investment.

With the help of the Renovation Calculator at My Home, you can determine and prioritize the improvements that would yield the maximum return on investment (ROI), improve the marketability of your house, draw in potential buyers, and potentially command a higher selling price. Follow a few steps to get your remodel, addition, or expansion cost in minutes.

Read more at Realtor.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

• 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.

Search Homes in Colorado

Search Homes in North Carolina

Search Homes in Oklahoma

Search Homes in Oregon

Search Homes in Minnesota

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

Homebuyers who are tired of waiting for lower mortgage rates can take concrete steps now to get a better deal on their own, according to a new report from the Realtor.com® economic research team.

Altogether, the four steps examined in the report can lower a borrower’s mortgage rate by nearly 150 basis points, or 1.5 percentage points. On a $500,000 home purchase with 20% down, that equates to a savings of $400 per month, or $4,800 annually.

Shopping around for the best rates yields the biggest average rate savings, of 86 basis points. Improving your credit score to at least Very Good (750-plus) can shave off an average of 39 basis points. And increasing your down payment to at least 20% of the purchase price, while keeping a debt-to-income ratio of less than 30%, reduces rates by a combined 22.5 basis points.

These findings come as average rates on 30-year fixed mortgages hover just below 6.5%, according to Freddie Mac. That’s down from the recent peak of 7.79% reached last year, but still more than double the average rates three years ago.

Following a tightening cycle to fight inflation, the Federal Reserve is expected to begin cutting its benchmark rate next month, after Fed Chair Jerome Powell recently announced that “the time has come for policy to adjust.” That will bring down borrowing costs, including mortgage rates, though how far and how quickly they fall remains to be seen.

“Certainly, the 10-year Treasury and Fed’s target policy matter a lot to mortgage rates,” says Realtor.com senior economist Ralph McLaughlin, the author of the new report. “But I think the real big takeaway here is, those aren’t the only things that matter. In fact, there are things that borrowers can do themselves to lower their mortgage rate.”

To calculate the impact on mortgage rates, Realtor.com analyzed more than 2 million mortgage originations between 2022 and 2023 using Freddie Mac’s Single-Family Loan-Level Dataset and statistical methods that allow us to determine what factors most influence a borrower’s mortgage rate at origination, all else being equal.

Here’s more information on four easy ways to secure a lower rate:

1. Shop different mortgage lenders

One of the most impactful ways to lower your mortgage rate may also be the easiest: getting quotes from multiple lenders to find the best deal.

The average difference between the highest rate and lowest rate offered to buyers who sought multiple offers was 86 basis points, the study found.

“It was surprising to see how much shopping around matters,” says McLaughlin. “We’re pushing a full percentage point there just by shopping around.”

It may also be surprising that most homebuyers don’t search for the lowest rate, but rather accept the first offer they receive.

A May study from LendingTree found that 54% of homebuyers who took out a loan for their most recent home purchase received only one offer.

By generation, baby boomers were the least likely to comparison shop, with just 28% doing so compared with 62% of millennials, the study found. According to LendingTree, nearly half of homebuyers who received multiple offers said they were able to secure a lower rate than the first offer they received.

Realtor.com offers a mortgage comparison tool to compare rates and fees from different lenders.

2. Raise your credit score

The average credit score in the U.S. was 705 as of March 2024, according to Equifax. That’s considered Good, but it is lower than the scores needed to secure the best mortgage rates.

Our study found that on average, borrowers with a Very Good or Excellent credit score (above 750) receive mortgages that are 39 basis points lower than borrowers with Bad credit scores (less than 650).

Raising your credit score can be easier said than done, but there are practical ways to boost your score in a relatively short period.

Continuing to make on-time payments is key. Another crucial factor is limiting the share of available credit being used at any given time. Maxing out your credit card can seriously weigh on your credit score, even if you pay off the full statement balance each month.

Keeping your credit utilization ratio below 30%, by either using your credit card less or expanding your line of credit, can lead to rapid improvements in your credit score.

3. Lower your loan-to-value ratio to 80%

In the first quarter of 2024, the average down payment was 13.6% of the total home purchase price, according to the Realtor.com economic research team. The median down payment amount was $26,000.

A down payment of 20% lowers your loan-to-value ratio to 80%, meaning that the loan amount is for 80% of the home’s value. According to the new report, mortgage applicants with a loan-to-value ratio of less than 80% receive mortgage rates that are 18 basis points lower than applicants with a loan-to-value ratio of over 95%.

As well, achieving a loan-to-value ratio of 80% often eliminates the need for private mortgage insurance, further reducing the cost of monthly payments.

4. Keep your debt-to-income ratio below 30%

Finally, the study finds that maintaining a debt-to-income ratio of less than 30% offers marginal improvements in mortgage rates. The figure refers to the share of monthly income devoted to debt payments, including student loans, auto loans, and credit card debt.

On average, mortgage applicants with debt-to-income ratios of less than 30% receive mortgage rates that are 4.5 basis points lower than applicants with a debt-to-income ratio of over 43%, the study found.

Although it offers only marginal direct benefits to obtaining a lower mortgage rate, lowering your debt-to-income ratio can also significantly boost your credit score, providing additional benefits to the mortgage borrower.

Read more at Realtor.com

Related Links

• Are We Heading into a Balanced Market?

• 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.

Search Homes in Colorado

Search Homes in North Carolina

Search Homes in Oklahoma

Search Homes in Oregon

Search Homes in Minnesota

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.

Search Homes in Colorado

Search Homes in North Carolina

Search Homes in Oklahoma

Search Homes in Oregon

Search Homes in Minnesota