Aileen Barrameda is preparing to buy a house in Los Angeles, despite higher mortgage rates that are currently twice what she locked in during the early stages of the COVID-19 pandemic. She believes entering the market now makes sense due to the anticipated rise in home prices.
The cost of housing remains a significant concern for many Americans, influencing political discussions. Recently, the average rate on a 30-year mortgage decreased to 6.35%, marking its largest weekly drop in a year and the lowest in 11 months. Despite this decline, buyers like Barrameda question whether borrowing costs will diminish significantly, given the Federal Reserve’s recent interest rate cut.
It’s important to note that the Fed’s interest rate decisions do not directly determine mortgage rates but do influence interbank lending rates. Although banks had already reduced mortgage rates in anticipation of the Fed’s cut, some experts suggest homebuyers should not expect substantial reductions in mortgage rates. Fed Chair Jerome Powell indicated that major rate changes are needed for significant impact in the housing sector.
Nicole Stewart, a real estate agent in Boise, Idaho, mentioned that a recent decline in mortgage rates has spurred some buyer activity, with multiple offers written in a single weekend. However, the broader housing market remains unaffordable for many. This trend is affected by homeowners who secured low rates during the pandemic and are now reluctant to sell, which restricts housing availability and contributes to rising prices.
Approximately 80% of mortgage borrowers currently have rates below 6.35%, complicating the market further. Julia Fonseca, an associate finance professor, noted that although any decline in mortgage rates aids the market, more substantial relief is not expected in the near future.
Kristin Carlson, another prospective buyer in Boise, highlighted that while easing rates make her feel closer to purchasing a home, multiple factors beyond mortgage costs impact her decision-making, including local market conditions and her personal needs. Matt Vernon from Bank of America acknowledged a slight uptick in buyer activity but maintained that the overall housing market still faces significant challenges.
Source: https://www.bbc.com/news/articles/c4gv3ynyp43o?at_medium=RSS&at_campaign=rss