Homebuying market sees hope as mortgage rates fall
OAKLAND, Calif. - The homebuying market has been sluggish as people prioritize travel and the start of school and then consider scary interest rates.
Mortgage rates are now at 6.5%, more than one percentage point lower than last October, according to the Federal Reserve Bank.
Other experts anticipate rates will drop another full percentage point by year's end.
The real estate and mortgage website Redfin expects lenders to reduce interest rates by as much as half a percentage point next month.
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"They're gonna continue to do it next year," said mortgage broker Robert O'Malley of PreferredRates.com.
O'Malley said he could bring recent FHA and VA homeowners into the low sixes or high fives currently, with conventional buyers just slightly higher.
"Forty percent of 21 to 34-year-olds are still at home living with mom and dad. And they're waiting for this opportunity; waiting for houses to become affordable," said O'Malley.
He added that baby boomer homeowners with low rates— or none— who are looking to sell can downsize, then purchase all cash and never have to concern themselves with interest again.
Compared to last October, the monthly payment on a $600,000 loan has decreased from about $4,300 to $3,800, a savings of more than $500 per month, thereby increasing buyers' purchasing power.
"People are anticipating a rate cut," said realtor Kathee Shatter.
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Shatter also said that September sales typically increase, particularly with the current market conditions.
"If the rates drop, the demand will go up. So, the perfect combination would be ready, catch the rate decrease, but not wait for everyone else to do it," she said.
Sellers who have lowered their prices will attract more buyers.
"So, if you're ready to buy, or sort of ready, you may be on the sidelines for the moment hoping for a rate cut and a good price as well," said Shatter.
Many homeowners, preferring to keep their lower rates, won't sell.
However, given that homes often take months to sell, those ready to sell will likely find buyers.
"If you can lock in the price of your home, that will never change. An interest rate can change and you can work on that later," said Shatter.