Here’s what lower interest rates could mean for the housing market.
Transcript:
CONWAY GITTENS: The Fed just cut rates for the first time in four years. We have policy makers hinting that more rate cuts are to come. What impact do you expect this to have on the housing market?
DANIELLE HALE: Yeah so as the Fed normalizes policy, I expect we’ll see mortgage rates decline. That should provide a nice boost for buyers. It increases their purchasing power or enables them to cut back on the amount of their income that they’re putting towards their home payment. And so that should boost housing demand. It also has the potential to increase housing supply.
A lot of existing homeowners are locked into their current mortgage rate because it’s so far below the rates that have been available in the mortgage market. It’s still the case that over half of homeowners with a mortgage have a rate that’s under 4% so we’re not likely to totally unlock those homeowners anytime soon. But every step down in the mortgage rate is going to make a difference for someone who’s going to be able to move forward with not only a home sale, but also likely a future home purchase. And that is really going to help improve conditions in the housing market.
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