After weeks of steady declines, mortgage rates are finally within a range that brings the possibility of homeownership closer to reality for many hopefully buyers. Still, in the wake of the Federal Reserve’s jumbo-sized interest rate cut in September, many buyers are opting to remain on the sidelines in the hopes that further Fed cuts later this year will lead to more mortgage rate declines. However, many experts say that now is the best time to take advantage of improved market conditions and get ahead of a potential demand surge that could put upward pressure on home prices and leave many would-be buyers out in the cold.

Housing Inventory Forecast: When Will There Be Sufficient Supply To Reduce Prices?

For one, many homeowners remain locked in at ultra-low mortgage rates, unwilling to exchange for a higher rate in a high-priced housing market. Consequently, demand continues to outpace housing supply—and likely will for the remainder of this year. “I don’t expect to see a meaningful increase in the supply of existing homes for sale until mortgage rates are back down in the low 5% range, so probably not in 2024,” says Rick Sharga, founder and CEO of CJ Patrick Company, a market intelligence and business advisory firm.

In the meantime, in addition to new home construction offering some relief, steeper mortgage rate declines could loosen the lock-in effect and provide some much-needed housing supply. Still, it will take far more supply than these sources can provide to fill the vast inventory deficit that a Pew Charitable Trusts report estimates at four to seven million homes.

As Rates Cool, Fall May Offer Some Affordability Relief for Hopeful Buyers.

Along with the falling leaves, falling mortgage rates are beginning to sweep in a fresh breeze of affordability for would-be home buyers. Monthly mortgage payments took a welcome dip in the four weeks leading up to mid-September. The median mortgage payment was $2,534, a 2.7% decline from the year before and the most significant drop since 2020, according to a Redfin report. By the end of September, home affordability continued to improve, with the average 30yr mortgage rates landing at a two-year low of 6.08%

If you’re a first-time home buyer, Danielle Hale, chief economist at Realtor.com, says you’ll likely find more options in your price range. “We’re seeing an increase in the number of homes on the market and the increase is actually even larger in lower price points,” Hale tells Forbes Advisor. “Builders have actually shrunk the size of new construction homes that they’ve been building trying to address some of these affordability challenges … so that might be an avenue for first-time home buyers to consider.”

My Quick Tips for Buyers & Sellers In Todays Market

Buyers:

• Know your budget. Instead of focusing on price, figure out how much you can afford as a monthly payment. Your monthly housing payment is influenced by the price of the home, your down payment, mortgage rate, loan term, home insurance and property taxes.
• Be flexible about home size and location. Perhaps your budget is sufficient for a small home in your perfect neighborhood, or a larger, newer home further out. Understanding your priorities and having some flexibility can help you move quickly when a suitable home enters the market.
• Keep an eye on the market where you hope to buy. Determine the area’s available inventory and price levels. Also, pay attention to how quickly homes sell. Not only will you be tuned in when something great hits the market, you can feel more confident moving forward with purchasing a well-priced home. I can help with this.
• Don’t be discouraged. Purchasing a home is one of the largest financial decisions you’ll ever make. Approaching the market confidently, armed with good information and grounded expectations will take you far. Don’t let the hustle of the market convince you to buy something that’s not in your budget, or not right for your lifestyle.

Sellers:

• Research comparable home prices in your area. Sellers need to have the most up-to-date pricing intel on comparable homes selling in their market. Know the market competition and price the home competitively. In addition, understand that in some price points it’s a buyer’s market—you’ll need to be prepared to make some concessions.
• Make sure your home is in top-notch shape. Homes need to be in great condition to compete and create a strong “online curb appeal.” Well-maintained homes and attractive front yards are major features that buyers look for.
• Work with me:  I have a strong local marketing presence and access to major real estate portals to offer significant value and help you land a great deal.
• Don’t put off issues that require attention. Prepare the home by making any repairs or improvements. Removing any objections that buyers may see helps focus the buyer on the positive attributes of the home.

Instant Reaction: Mortgage Rates, October 22nd 2024

Facts: The average 30-year fixed mortgage rate from Freddie Mac jumped to 6.32% this week from 6.12% last week. At 6.32%, with 20% down, a monthly mortgage payment is $1,985 on a home with a price of $400,000. With 10% down, the typical payment would be $2,233.

Positive:  Mortgage interest rates are up, so seeing the positive can be hard. However, CPI inflation is also out today, at the lowest level since February 2021. Shelter, which is 30% of CPI, has been persistently high but declined to a level last seen in February 2022.

Negative:  Home buyers, especially first-time buyers, are extremely sensitive to mortgage rates, and the increase in rates helps to explain the retreat in mortgage applications. While inflation has cooled, that does not mean the price of goods has dropped; they are just not increasing.

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