Mortgage rates and the housing market
Lower rates are expected to bring some relief to housing markets, which have undergone a period of price distortion that is pushing more people toward renting. But the impacts might not be evident right away, said Steve Rick, chief economist at TruStage.
In the wake of the pandemic’s dramatic influence to housing markets nationwide, the financial strain of renting a home or obtaining a mortgage has weighed heavily on U.S. households. A mismatch between high demand and low supply has led to volatile times for renters and homeowners.
A rate cut could bring some reprieve for mortgage borrowers, but there may be a delay, in part because many lenders have already priced in a Fed cut in the near term. Further cuts are likely to take place at Fed meetings in November and December, experts said. “While not immediate, we do expect these rate cuts to eventually lower mortgage rates,” Rick said Tuesday in comments emailed to The Post. “This should increase housing supply in the coming months and years.”
Falling mortgage rates may help more people purchase a house - if they can find one to buy, Brusuelas said. Although more homes eventually could be built as rates go down, some areas may see rising prices in the short term if more people compete for the same pool of houses, he said.
Constance Hunter, chief economist at the Economist Intelligence Unit, disagreed with Brusuelas’s prediction. Many homeowners have been reluctant to sell their houses at a time of relatively high interest rates, since they worried they couldn’t afford a new mortgage to purchase their next home. Now some of those owners will become sellers, Hunter said.
“There’s a very strong possibility that it could actually bring more supply to the market,” she said. “It’s going to solve two problems at once. People are more likely to provide supply, and for those purchasing, [lower interest rates make] the financing cost be more friendly to buyers.”
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