It may take more than the Federal Reserve throwing us a lower interest rate bone this month to make everyone happy. Nevertheless, when it comes to lower rates, we’ll take what we can get, but will it solve the real market problem?
Even though mortgage rates in the country are at the lowest level in more than a year (6.5% on average for a 30-year fixed rate mortgage), it may not make much of a difference for homebuyers. With record housing prices and limited inventory, a one quarter lower blip in rates for most buyers can’t make up for the higher prices and lack of inventory.
There are homeowners with low-rate mortgages who are still reluctant to sell and move on as much as they may want to. A quarter point or even a half point is just not enough encouragement for them to give up a once-in-a-lifetime 3% mortgage. So, the market continues to be locked up with prices still pushing up for those properties that come on the market, and there aren’t too many of them.
However, there are still benefits to lower rates, especially for a first-time borrower.
For a $500,000 mortgage, the difference between a 6.5% rate and an 8% rate is $509 a month, enough to qualify many buyers at the lower rate to be approved for financing. There is speculation that the movement for a lower rate has already been figured in and another rate cut this month may not have a big impact.
Based on the July sales statistics in Mantee County, there are 10% more single-family properties available than July of last year but only 0.4% more condos on the market. Since condos are more of a seasonal sale, it’s not surprising to have fewer available properties than single-family.
Here on Anna Maria Island and all of the other coastal communities in the area, including our neighbor, Cortez, buyers in these areas are less affected by mortgage rates. Therefore, the market for high-end properties will be less influenced by mortgage rates than by the overall economy.
Many if not most high-end buyers are all cash and even if they decide on a mortgage to free up more cash, they will likely not decide on buying because of a quarter or even a half point reduction. They’re eyeing the health of the general economy and the position of the lawmakers, particularly in Congress, on business and the stock market.
Nevertheless, a healthy real estate market generally is good for all of the market. There is a trickle-up effect of a robust lower-end market positively impacting all price points in the marketplace.
Finally, last week we talked about the revision of broker compensations. There are any number of ways for real estate professionals to adapt to the National Association of Realtors’ new ruling and if you’re buying or selling a property, you will be exposed to a variety of opinions and operating guidelines. As always, choose a real estate company and individual you trust and are comfortable with and roll with it; eventually it will become clearer.
Will the Federal Reserve move the needle on rates or will it just be more of the same old, same old? Stay tuned.
