The housing market in the United States has slowed down recently, but falling mortgage rates are expected to bring new life to the industry. While lower rates could provide potential homebuyers with more purchasing power, they could also increase competition for homes and drive prices even higher. A further drop in mortgage rates may make it more difficult for buyers to actually purchase a home as demand surges. The affordability of homes in the US has become a major issue as prices reach record highs, exacerbated by the Federal Reserve’s interest rate hikes over the past two years.
However, there is hope on the horizon as the average 30-year fixed mortgage rate has fallen to its lowest point in over a year. There is a growing expectation that the Fed will begin cutting interest rates next month, which will influence borrowing costs throughout the economy. Existing home sales rose in July after four months of declines, and demand is expected to continue increasing as interest rates drop. Fierce competition and bidding wars are likely as the US faces a shortage of homes for sale compared to demand.
Recent rule changes by the National Association of Realtors could further boost demand for homes, with expectations of lower transaction costs in the future. The impact of these changes on the housing market is yet to be determined. Supply has also been a limiting factor in the housing market, as fewer homeowners have been willing to sell in a higher interest rate environment. Falling rates may encourage more homeowners to put their properties up for sale, potentially breaking the mortgage “lock-in” effect. A survey found that many homeowners would be comfortable selling and buying homes if mortgage rates fell below 6%.
While some potential buyers may be waiting for rates to drop even further, experts caution against trying to time the market perfectly. Mortgage rates are expected to decrease slightly over the next 18 months, but not significantly enough to reach the low rates seen in previous years. First-time homebuyers are advised to ensure they are financially prepared before entering the market, as homeownership is a long-term commitment. Regardless of current mortgage rates, it is important to consider all financial aspects of buying a home to avoid any potentially devastating consequences.
