What Does the Fed’s Rate Drop Mean for the Market?
You’ve likely already seen this big news by now: On September 18, the Federal Reserve (finally) decreased rates by a half point. This is the first cut since 2020, and although the cut was expected now that inflation is more under control, the sizable amount of the decrease is a welcomed surprise! Rate cuts allow for easier borrowing after the 23-year high proved to be an obstacle for many Americans. When we take a look at how the cut will affect the real estate market in particular, the most notable impact will be on mortgage interest rates. However, because so many industry experts forecasted the cut ahead of the announcement, the market already began to see changes before September 18.
Mortgage Interest Rates
Buyers can rejoice now that mortgage rates are lower than they have been in the past two years at 6.08% (at the time of publishing). After a long period of waiting for rates to drop, including the harsh record-high of nearly 8% in October of last year, buyers can start to reassess their finances and budget as they embark on their buying journeys. Hopefully, the new rates open the possibility of purchasing property for buyers who were previously priced out of the market. We’re even seeing homeowners consider refinancing if they purchased when rates were higher. With rates projected to dip below 6% in 2025 and potentially get as low as 5.5% by the end of next year, some people are still putting their plans on hold in hopes of timing the market.
Whether you’re ready to take advantage of these favorable new conditions right now or you’re still not ready to jump in, I would recommend preparing either way. We could see a more competitive landscape in the new year, and you’ll want to be prepared to make quick, confident decisions when the right opportunity arises for you personally. Sellers, increased buyer demand will likely push price growth, so if you’re looking to sell soon, begin preparing your home now so you can receive the best possible ROI (return on investment) on your sale.
Supply Hits a High
There’s more good news for buyers: U.S. inventory levels are at highest they have been in the past four years. This is a huge plus as lower rates will only usher in more buyers into the market, meaning more competition—so the more supply available, the better.
Hopefully, the cut by the Fed encourages more new construction in Seattle, which has seen a drought of new developments for the past couple of years. High rates make it difficult for builders to secure loans that allow them to acquire land and get their projects started. As many of our past blogs have examined, Seattle needs more new properties to allow first-time buyers to afford to live in the city, filling in the “missing middle” that we see in the greater Seattle area.
As the presidential election quickly approaches, we’ll likely see a slowdown period in the market, with it picking back up once the future is more certain. Reach out to me today if you’d like to discuss how the recent changes might affect your own real estate goals or portfolio.