By Tyler Bernadyn and curated by Cam Stewart, Senior Loan Officer, Shamrock CMG Home Loans
You might have seen news about the Fed lowering interest rates and how this could benefit credit cards and mortgages. But what does this mean for the housing market, and when can we expect to see changes?
After increasing rates from March 2022 to July 2023 to fight inflation, the Fed is now expected to lower rates. However, it’s important to note that the Fed doesn’t directly set mortgage rates. The recent reduction was anticipated, so mortgage rates had already started to drop, reaching their lowest levels since February 2023. As the Fed prepares for two more meetings this year, mortgage rates will adjust based on those expectations.
According to the Mortgage Bankers Association (MBA), home sales are projected to grow only 1.1% quarter over quarter, with home prices expected to dip slightly by 1.2%. However, year-over-year, sales and prices are up nearly 10% and 6%, respectively. Similarly, Fannie Mae forecasts about 1% growth in the market, with 30-year fixed mortgage rates averaging around 6.5% in Q4, lower than the 7.3% average in Q4 2023.
Inflation seems to be under control, and the Fed will focus more on employment numbers as they decide on future rate reductions. Currently, Rhode Island’s unemployment rate has risen from 3.1% to 4.5%, which the Fed is monitoring closely.
While national trends provide some insight, real estate is local, and our market may behave differently. A significant challenge remains the lack of homes for sale. Many homeowners are hesitant to sell because they’d trade a low 3.5% mortgage for a higher 6.5% rate. This limited supply has driven prices to record highs, making homes less accessible.
However, there’s hope! Interest rates are expected to gradually decrease over the next few years. Instead of just waiting for lower rates and competing with many other buyers, there are options available now.
Homebuyers can take advantage of various down payment assistance programs offered by the state, charities, and private organizations. Some programs allow you to crowdsource your down payment or earn rewards from everyday purchases that can be applied to your down payment. There are also innovative solutions for purchasing vacation homes or investment properties.
If we continue with traditional methods, we may see only 1% growth in Q4. But by exploring these new opportunities, homebuyers can do better—and so can the market.
Working with a local lender is critical. If you’d like to learn more about these options and the current market here in Newport County, I’d be delighted to help. You can contact me directly at 401-855-2526 or via email at Cam@shamrockcmg.com.
