PORTSMOUTH, Va. (WAVY) — The United States Federal Reserve’s recent rate cut could bring changes to the housing market, impacting both buyers and sellers.
By end of 2024, interest rates will decline by approximately 50 basis points. This marks the Fed’s first cut in four years, leaving the federal funds rate tinkering between 4.75 and 5%.
While this is good news for those in the market to buy a home, Alphradezsa Lexi Church, Creed Realty associate broker and realtor, said the cut is not actually a half of a percentage off mortgage rates.
“So there is a lot of confusion with the Fed rate cuts,” Church said. “So when the feds cut the rate, they are affecting borrowing costs, like on credit cards, car loans, things like that. That’s not like a direct correlation with our mortgage rates.”
What potential buyers will most likely see, according to Church, is more and more sellers listing there homes, and particularly those who purchased homes between 2020 and 2021, when rates were at an all-time low.
“Nobody really wanted to sell their home when they got it for, you know, 2.5%, 3%, and then they get a loan for 7%,” she said. “That’s almost two, three times their rate. So we will start to see homes coming back on market, which is really good for inventory, really good for buyers, because they’re not going in every single deal and multiple offer situation. And obviously you have more buying power when your rate is lower so you can afford more home.”
So will the interest rate cut actually make a difference in home affordability?
“Absolutely,” Church said. “Any drop in mortgage rate helps your affordability considerably. I would say the Fed rate cut is very indicative of a trending mortgage, mortgages going down, of the mortgage rates going down, and that if you are thinking about getting into the buyer’s market as you’re thinking about starting your home journey, now is a good time to do that.”
Church stressed that all homebuyers must first understand their buying power before purchasing a home.