Rate cuts are coming! But what will it actually mean for the real estate market? And how will it shape the market?
The Feds did mention in late 2023 that they are projecting 3 RATE cuts. No one knows if that means .25% for each cut or if they will cut more. All we know is that the FED will start to cut rates, the first cut technically won’t do much since it will likely be .25%. Even if they cut .75% in 2024 that would only bring the Feds fund rate down to 4.5%! Which is still a higher rate for a longer scenario and that rate would be above the PCE inflation number. The good news with a rate cut is the signal to the overall market that the Feds are done hiking. We have officially pivoted and the data is more in line with where they want it to be. Rates cuts will help rates for sure, maybe spreads and overall, it will help the mindset of the market that the Feds finally landed the plane.
How do rate cuts help and hurt home buyers?
Homebuyers in 2024 are getting good news with rates starting the year off much lower than Q4 of 2023. Rates will continue to slowly decrease over this year, which will help affordability. It will also help lower payments and hopefully release more inventory into the market.
Falling rates will not be all sunshine and roses for homebuyers! They will face more competition, inventory issues, and affordability factors still at play! A lot of buyers will be forced to be very aggressive with offers to beat out the competition.
Want to know more about buyers’ pain points? Click here to read more!
Is it better to wait for the rate cuts to buy or jump in now?
Trying to time the real estate market is a tough thing to do. It often does not work out the way we hoped. If you can buy now, afford now and it makes sense then do it. You will have an opportunity to refinance later and lower your monthly payment soon. With 90% of homeowners locked in a 5% or less rate and home prices going way up over the last 4 years, most homeowners are sitting tight. This means a lack of inventory and as mortgage rates fall will bring more buyers into the market.
When rates land in the 5’s, that will bring a HUGE number of buyers off the sideline, lots of competition, and the best position to be in to be refinancing NOT buying. Waiting in this market will only cost you more and add extra stress to trying to find a home and get your offer accepted.
Date the rate and marry the house…. REFI time!
Yes, this term is overplayed and everyone is sick of it but a year from now this will make sense for those that purchased in 2022/2023 and 2024. They will not have to deal with the craziness of lower rates and trying to buy a house, they will get the benefit of a refinance and saving money. 2025 is going to be the start of the refi boom, the commercial market heating up, real estate investors picking up steam and if we don’t get the inventory, well home prices continue to rise.
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