The Fed Cut Interest Rates: Is Now a Good Time to Buy a House?
On September 18, 2024, the Federal Reserve lowered its interest rate benchmark by half a percentage point, which could be advantageous for homebuyers seeking lower mortgage rates. This move has already influenced daily average mortgage rates, which dropped to 6.12% on Monday, September 16th, marking their second-lowest level in nearly two years. This reduction in rates has significantly increased homebuyers' purchasing power, adding over $30,000 in buying power since July.
As of September 1st, median monthly housing payments fell to $2,534, the lowest level since January. The Fed's recent rate cut is expected to be followed by more gradual 25 basis point cuts. Although markets anticipated a faster round of cuts, mortgage rates may slightly increase in the coming days before stabilizing.
Mortgage rates have been on a downward trend since May, largely due to improving inflation, and have decreased by over 1.10% compared to the same time last year. This trend may continue into October, potentially leading to larger year-over-year improvements. Additionally, total listings have increased by 20% compared to last year, providing more options for buyers.
Given the current market conditions, now is considered a good time to buy a house if you have the financial means. Waiting for rates to fall further could result in increased competition and higher prices. Lower rates not only save money over the loan term but also allow more of the mortgage payments to go towards building equity.
The housing market has been unpredictable recently. Typically, higher mortgage rates push house prices down, but the opposite has occurred over the past two years. Declining inventory usually leads to more competition, but high prices have kept many buyers out of the market, causing some homes to remain unsold while others sell quickly.
Economists are uncertain about future mortgage rate trends, and housing prices remain near record highs. While the recent dip in mortgage rates offers hope for homebuyers, it is essential to be prepared for potential surprises.
For those deciding between renting and buying, it is advisable to compare the costs and secure a mortgage pre-approval. Investors believe the Fed is done limiting inflation, and a gradual decline in mortgage rates is expected through the end of the year. However, significant drops in rates are unlikely as they have already factored in the recent interest rate cuts.
The housing boom of 2021-2022 was driven by a severe shortage of homes and record-low mortgage rates. Although construction has rebounded and inventory is slowly recovering, prices have continued to rise due to homeowners holding onto pandemic-era rates. This trend has led to a unique market situation where house prices remain high despite increasing inventory and low sales.
Home sellers should prepare for more competition as lower mortgage rates attract more buyers. Many potential buyers have been waiting on the sidelines due to high rates, and the recent rate drops are encouraging them to enter the market.
If you have the means, now is an excellent time to lock in a low mortgage rate. Lower rates enable buyers to qualify for larger loan amounts or enjoy lower payments within their current budget. All-cash buyers should also act now to avoid potential price hikes as rates continue to drop.
In conclusion, if you are in the market for a house and have been deterred by high rates, now is an opportune time to connect with an agent and start your home search. Rates are expected to trend slowly downwards, and the market is gaining momentum. Delaying your purchase could result in increased competition.
This article is for informational purposes only and is not a substitute for professional advice from a medical provider, licensed attorney, financial advisor, or tax professional. Consumers should independently verify any agency or service mentioned will meet their needs.
