How the Federal Reserve’s Next Move Could Impact the Housing Market
How the Federal Reserve’s Next Move Could Impact the Housing Market With September here, attention is focused on the Federal Reserve (the Fed). The prevailing expectation is that they will reduce the Federal Funds Rate at their upcoming meeting, largely due to recent indications that inflation is easing and the job market is slowing. Mark Zandi, Chief Economist at Moody’s Analytics, stated: “They’re ready to cut, just as long as we don’t get an inflation surprise between now and September, which we won’t.” So, what does this mean for the housing market and, more specifically, for you as a potential homebuyer or seller? Why a Federal Funds Rate Cut Matters The Federal Funds Rate is a crucial factor influencing mortgage rates, though other elements like the economy and geopolitical uncertainties also play a role. When the Fed lowers the Federal Funds Rate, it reflects broader economic conditions, and mortgage rates typically adjust in response. Although a single rate cut may not cause a dramatic drop in mortgage rates, it could contribute to the ongoing gradual decline. As Mike Fratantoni, Chief Economist at the Mortgage Bankers Association (MBA), notes: “Once the Fed kicks off a rate-cutting cycle, we do expect that mortgage rates will move somewhat lower.” And any upcoming cut to the Federal Funds Rate is likely to be part of a series of reductions. Lawrence Yun, Chief Economist at the National Association of Realtors (NAR), explains: “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 industry experts project for mortgage rates through 2025. One factor contributing to this gradual decline is the expected cuts from the Fed. The graph below displays the latest forecasts from Fannie Mae, MBA, NAR, and Wells Fargo (see graph below): With recent improvements in inflation and indications of a cooling job market, a Federal Funds Rate cut is expected to result in a moderate decline in mortgage rates (as shown by the dotted lines). Here are two major reasons why this is beneficial for both buyers and sellers: 1. It Helps Alleviate the Lock-In Effect For current homeowners, lower mortgage rates could alleviate the lock-in effect, where people feel stuck in their current homes because today’s rates are higher than their existing rate. If the concern about losing a low-rate mortgage and facing higher costs has kept you from selling, a slight decrease in rates might make selling more appealing. However, this change is not expected to result in a surge of sellers, as many homeowners may still be reluctant to give up their favorable mortgage rates. 2. It Should Boost Buyer Activity For potential homebuyers, a drop in mortgage rates will make the housing market more attractive. Lower mortgage rates can decrease the overall cost of homeownership, making it more feasible for you if you’ve been waiting to make a move. What Should You Do? Although a Federal Funds Rate cut is not expected to lead to a dramatic drop in mortgage rates, it will likely contribute to the ongoing gradual decrease. While this anticipated rate cut is a positive development for the future of the housing market, it's important to evaluate your options right now. As Jacob Channel, Senior Economist at LendingTree, summarizes: “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 anticipated Federal Funds Rate cut, influenced by improving inflation and slower job growth, is expected to have a positive, albeit gradual, effect on mortgage rates. This could create new opportunities for you. When you're ready, let’s connect so you can be prepared to take action at the right moment.
Should You Sell Now? The Lifestyle Factors That Could Tip the Scale
Should You Sell Now? The Lifestyle Factors That Could Tip the Scale Are you unsure whether to sell your house now or wait? It’s a common dilemma, but one crucial factor to consider is your lifestyle. While financial aspects are important, personal motivations for moving can often justify making the move sooner rather than later. An annual report from the National Association of Realtors (NAR) provides insight into why homeowners decide to sell. The top reasons all revolve around life changes. The graph below highlights these motivations: As the visual indicates, the main reasons homeowners decided to sell include wanting to be closer to friends or family, outgrowing their current home, or undergoing significant life changes such as getting married or having a baby. Downsizing or relocating for work also featured prominently. If, like these homeowners, you find that your current home no longer meets your needs in terms of features, space, or amenities, it might be time to consider discussing your options with a real estate agent. Your needs are important, and an agent can guide you through your choices and provide insights into today’s market, helping you make a decision based on what’s most important to you and your family. Your agent will also help you understand your home’s equity and how it can facilitate a move to better suit your evolving needs. As Danielle Hale, Chief Economist at Realtor.com, explains: “A consideration today's homeowners should review is what their home equity picture looks like. With the typical home listing price up 40% from just five years ago, many home sellers are sitting on a healthy equity cushion. This means they are likely to walk away from a home sale with proceeds that they can use to offset the amount of borrowing needed for their next home purchase.” Bottom Line Your lifestyle needs could be a strong motivator for making a change. If you’d like assistance in evaluating the pros and cons of selling your house, let’s have a conversation.
How To Avoid Today's Top Seller Mistakes
How To Avoid Today's Top Seller Mistakes Curious about the top mistakes sellers are making today and how to avoid them? Common pitfalls include pricing a house too high, skipping repairs, lacking objectivity, and being unwilling to negotiate. To steer clear of these traps, partnering with a trusted real estate agent is key. Let’s connect so you have a knowledgeable advisor to guide you through the process.
Are We Heading into a Balanced Market?
Are We Heading into a Balanced Market? If you’ve been following the housing market in recent years, you’ve seen that sellers have had the advantage. But with inventory levels now increasing, could this dynamic be changing? Here’s what you need to know. What Is a Balanced Market? A balanced market is typically characterized by a five-to-seven-month supply of homes for sale. In such a market, neither buyers nor sellers have a distinct advantage. Prices usually stabilize, and there’s a more manageable number of homes to choose from. After years of sellers having the upper hand, a more balanced market would be a welcome change for those looking to move. The question is, is the market actually moving in that direction? At the start of the year, the national inventory was at a three-month supply, but it has now increased to four months. While this may seem modest, it indicates that the market is approaching a more balanced state, though it's not quite there yet. It’s important to note that this rise in inventory isn’t leading to an oversupply that would trigger a market crash. Despite the recent increase, the supply remains insufficient for such an outcome. The graph below, using data from the National Association of Realtors (NAR), illustrates past inventory levels and current figures: For now, the market remains in seller’s territory, though it’s less frenzied than it has been in recent years. As Mark Fleming, Chief Economist at First American, notes: “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 affects you and the market conditions you’ll encounter 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, using the latest data from NAR and Realtor.com, illustrate these changes: Homes Are Sitting on the Market Longer: With more homes on the market, they are not selling as quickly as before. For buyers, this means you may have additional time to find the right home. For sellers, it's crucial to price your house appropriately to ensure a timely sale; otherwise, buyers might opt for better-priced alternatives. Sellers Are Receiving Fewer Offers: As a seller, you may need to be more flexible and open to negotiating on price or terms to close the deal. For buyers, you might encounter less intense competition, as more options become available. Fewer Buyers Are Waiving Inspections: As a buyer, you now have more negotiation power, which is why fewer buyers are waiving inspections. For sellers, this means you should be prepared to negotiate and address repair requests to keep the sale process moving smoothly. How a Real Estate Agent Can Help However, this is just the national overview. The market conditions in your specific area will vary based on local inventory levels. It’s important to consult with a local real estate agent for insights into how your market is performing. Whether you’re buying or selling, understanding these local market changes gives you a significant advantage. Your agent has access to the latest data and local insights, helping you navigate the market effectively. Bottom Line The real estate market is constantly evolving, so staying informed is crucial. Whether you’re buying or selling, understanding the shift toward a balanced market can be beneficial. If you have any questions or need expert advice, feel free to reach out.
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