Sky high pandemic-era mortgage rates are falling across the country, according to new data, but some homeowners will feel the relief more than others.
Fresh research from Realtor.com published today found Denver, Raleigh, North Carolina, Washington, DC, Virginia Beach and Baltimore will benefit significantly from declining rates over the next few months.
Realtor.com’s economist Jiayi Yu says cities with a higher portion of mortgage holders will benefit more from declining rates[/caption] Markets including West Virginia, Mississippi, Louisiana and New Mexico will benefit less from falling mortgage rates[/caption]However, housing markets in West Virginia, Mississippi, Louisiana, New Mexico and Arkansas will benefit less from falling rates because a higher portion of homeowners in these states own their own homes outright.
In general, markets with greater usage of mortgages are more sensitive to rate changes.
Realtor.com economist Jiayi Yu said a higher portion of homeowners in some parts of the country will also be “unlocked” as rates fall closer to 6%.
“Notably, according to our analysis, 84% of existing mortgages have a rate of 6% or lower,” Yu told Realtor.com.
“In other words, as mortgage rates approach the 6% level, we can expect to see more homeowners ‘unlocked,’ especially in areas with high mortgage usage.”
Homeowners were “locked in” during the pandemic after they bought homes at record low interest rates as it did not make financial sense to buy another home at a higher interest rate.
As mortgage rates fall, economists project there will be an increasing number of houses coming onto the market.
According to Realtor.com’s September Housing Market Report, there were 34% more homes for sale than a year ago, a sign that falling rates might be helping the market bounce back.
Among the top 50 metro areas, homeowners in Washington, DC will benefit from the impact of lower rates given the high number of mortgages.
According to data from Realtor.com, 74.7% of homeowners in 2023 in DC lived in housing units with a mortgage.
As the Federal Reserve looks to slash rates further, housing experts project renting will become more affordable across the country.
Housing costs are expected to drop within three months, according to economists, who exclusively told The U.S. Sun last week that the rate cut will stimulate the economy and make things more affordable for consumers.
Housing experts said that while the rate cuts will take some time to work their way into the economy, the rate-cutting cycle will likely put downward pressure on the cost of living.
While rents are rising in some parts of the country, CoreLogic research recently reported by The U.S. Sun revealed rents have started to fall in Austin, Texas and Phoenix, Arizona slipping 1.1% and -0.8% respectively.
By comparison, eight metro areas in the US posted gains of 4% with Washington D.C topping the country for the annual rent growth chart.
SUPPLY SQUEEZE
Announcing the recent rate cut in September, Federal Reserve chairman Jerome Powell noted that the Fed rate cut would help thaw the frozen housing market which had kept many homeowners locked in their homes.
The Fed cut interest rates by half a percentage point last month, a move that marked the first time the central bank had cut rate since 2020.
Mortgage rates had already begun to ease in anticipation of the Fed rate cut.
“As rates come down, people will start to move more, and that’s probably beginning to happen already,” Powell said in September.
But Powell also warned the housing market was constrained by a lack of supply which was beyond the direct control of the Fed.
“It’s hard to zone lots that are in places where people want to live. And you know, where are we going to get the supply?” he noted.
“And this is not something that the Fed can can really fix. But I think as we normalize rates, you’ll see the housing market normalized.”