Falling Interest Rates Make for These Great Housing Opportunities
Written by
Jordan Rosenfeld
Edited by
Amber Barkley
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Since the Federal Reserve Board (The Fed) announced it was cutting interest rates by half a percent in September, mortgage interest rates began to decline, as well. Although they went up again after the September jobs report, they are predicted to ultimately go down. It’s hard to predict how much lower rates may fall, but this could signal a shift in the housing market.
The market has been somewhat sluggish for those looking to jump in on a new house due to low inventory. Lower rates can signal it’s time to jump on certain kinds of real estate opportunities.
GOBankingRates spoke with Nikki Beauchamp, an associate broker with Sotheby’s International Realty, and Matt Weaver, a mortgage originator with Cross Country Mortgage, to offer tips on the best real estate opportunities falling rates can provide.
Fortune Favors the Ready Buyer
While Beauchamp doesn’t think the Fed will make significantly big further rate cuts, every little bit helps. However, it’s buyers who are ready — they’ve got a down payment saved, they’ve got a mortgage pre-approval, and they know where they want to buy — who are in the best position to do so now, she said.
What happens when interest rates fall significantly is that “if more people come into the market, you have the potential of more competition for the same potentially limited inventory,” Beauchamp said.
Downsize Potential
This might be a great time for boomers — or even Gen Xers — who are looking at their stage in life and realizing they’re ready for “what comes next,” Beauchamp said. “I am seeing, in my overall sphere of influence, clients figuring this out. That may be that final single story home where you can adjust, create new memories and not have to worry about all of the upkeep or those investments that weren’t made during the course of ownership.”
A Home To Age in Place
Additionally, people looking to buy their “last” home, with the idea of finding something suitable to age in place, will be among those in a good position to buy right now. This may be more true for those who have an existing home to sell — something they likely got a great interest rate on — because they can use that equity to buy something that’s better for their retirement needs.
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Sellers Are Anxious To Sell
Weaver feels that home buyers have an immediate advantage right now, because sellers are anxious to sell. “Because there isn’t this influx of buyers coming into the marketplace, sellers are becoming a little squeamish and skittish as inventory levels are increasing across the nation.”
He said that it immediately opens the door to home buyers being able to get better deals on homes: They have room to negotiate better prices and better terms on a home of their choice.
You Can Negotiate Closing Credits
Another advantage to seller anxiety, Weaver said, is that home buyers, with the right real estate agent, can negotiate sellers giving incentives or credits back at closing in the current market.
“Then we, as lending institutions, can take those credits and actually buy down the buyer’s interest rate to where it’s well below the market rate,” he explained. “They can actually do much better and provide themselves with lower interest rates through these negotiating strategies, because sellers are concerned.”
Look to Condominiums
In terms of types of properties that might have the most available inventory right now, Weaver said, “Without a doubt, condominiums are a property type that has a lot more inventory than single family homes or townhomes.”
These can also often be less expensive than single family or multi-family homes.
Take Advantage of First Time Home Buyer Programs
Another thing Weaver stressed is that “for the first time home buyer, there are so many government and state incentive programs and down payment assistance programs that are available in today’s market, more so than ever before.”
He urged these buyers to become familiar with those to potentially ease the costs of buying.
Don’t Wait for Steeper Cuts
Weaver said that waiting for a lower rate might not be worth it, not only because “you can’t sharpshoot a bottom in any market, whether it be price or whether it be interest rates,” but also because lower rates means more buyer competition.
“What we can do is: We can set ourselves up for getting ourselves the best deal possible when looking to buy. And a market like today lends itself to that,” he said.
Pay Close Attention to Financial Circumstances
Of course, no one should buy just because of a little rate cut, Beauchamp insisted.
“It’s so important to look at your specific financial circumstances and your plans and goals. Make the decision that makes the most sense for you,” she said.
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