Huge Rate Drop–What Does It Mean for Buyers and Sellers?

What the real estate market will look like now that rates have dropped.

We've all been waiting for interest rates to drop, and the good news is they finally have! As of August 5, we've seen a substantial decrease in rates that could have a big impact on the market.

Over the past 90 days, interest rates have decreased by a full percentage point. Generally, when rates drop by one percentage point, it brings up to 5 million buyers back into the market. This is great news for our industry, but it also means things are about to get very busy. Here’s what the recent news means for our market:

• Increased buyer activity.  With the recent drop in rates, we can expect a surge of buyers entering the market. There's currently a decent amount of inventory available, which should give buyers a good selection of homes to choose from over the next 2 to 4 weeks.
• More competition.  However, as more buyers come off the sidelines and start looking for homes, the competition will increase. I’m already seeing an uptick in calls from buyers who are ready to make a move. While I hope we don't see a repeat of the intense market conditions we experienced during and after COVID-19, where we had multiple offers and buyers lined up to see homes, we are definitely heading towards a more competitive market.

"Lower rates mean higher competition and multiple offers, so buying now and refinancing later will help you avoid stress."

• Further rate drop.  There's also speculation that the Federal Reserve may drop rates by as much as half a point at their next meeting. If this happens, we could see interest rates dropping into the 5% range. This would likely bring even more buyers into the market, further increasing competition and potentially leading to multiple offers on homes.

If you or someone you know is considering buying a home, now is the perfect time to do so.  By buying now, you can avoid the tight market competition and multiple offers, and have the opportunity to refinance when rates lower further.

For sellers, especially those with mortgage rates under 4%, it may take some time before we see an increase in inventory. Many sellers are hesitant to leave their current low rates unless they see a significant benefit in doing so. However, those with substantial equity in their homes who are looking to downsize may start to enter the market as rates become more favorable.

Feel free to reach out to me by phone or email for any real estate needs or questions you may have. Just call 602-909-5994 or email bobhertzog@gmail.com. I look forward to hearing from you!