The day we’ve been waiting for has finally arrived. Interest rates are going down. Now how long before house buying activity goes up? For moving companies that have been hit by decreased demand, the question carries high stakes. While there’s no way to tell for sure, current housing market predictions can provide insights about what to expect in the coming months.
The Impact of the Fed Rate Drop on Mortgage Rates
On September 18, the Federal Reserve cut interest rates by 50 basis points, or half a percentage. According to CBS News, it was the first interest rate cut in more than four years, and it could have a big impact on the personal finances of many Americans.
One of the ways the interest rate cut could affect people is through lower mortgage rates. CNN says mortgage rates reached a 20-year high of 7.79% in October 2023. Combined with rising home prices, many would-be buyers have been priced out of the housing market. Additionally, current owners may be putting off selling their home and buying a new one due to high rates, and this results in a smaller pool of available houses for sale.
According to ABC News, mortgage rates were already dropping in the months leading up to the Fed rate cut in anticipation of the expected cut. At the time of the cut, data from Freddie Mac showed that the average interest rate for a 30-year fixed mortgage was about 6.09%.
What’s Next for Interest Rates and Mortgage Rates?
Now that interest rates and mortgage rates have fallen, many are wondering how low they can go. J.P. Morgan says the Federal Reserve is expected to lower rates by at least 100 basis points, or 1%, by the end of 2024. As a result, primary mortgage rates could fall by up to 60 basis points, possibly even more depending on how the rates market goes.
Lower rates may not be in store, at least not in the near future. USA Today says that people hoping for mortgage rates in the 3% to 4% range are likely to be disappointed. A chief economist with Moody’s predicted that mortgage rates could end the year at around 6% and fall to around 5.5% by the end of 2025.
What’s the Impact on Housing?
Lower mortgage rates are certainly attractive to potential homebuyers, and some people who have been waiting for rates to drop may be ready to buy a house now.
However, there are potential complications. J.P. Mortgage says that lower mortgage rates could boost house sales, but a weak labor market could negatively impact consumer demand.
NPR warns that lower mortgage rates could actually lead to higher prices. If more people decide to buy a house now, demand could outpace supply, driving up home prices and making it harder to buy a house. Importantly, high mortgage rates aren’t the only problem for home affordability. According to Yahoo Finance, U.S. home prices have surged by 47% since 2020.
U.S. News says the next five years will likely be challenging for both homebuyers and renters, and house sales will likely remain low.
According to Realtor.com, real estate experts predict that some home sellers who have been waiting for lower interest rates will go ahead and start selling, resulting in new inventory and more sales. Likewise, some homebuyers may be ready to take action, and they may have an easier time qualifying. However, home prices will probably remain high.
The Takeaway for Moving Companies
If business has been down, you’re not alone. An owner of one moving company told Spectrum News that high interest rates had led to the worst slow season since 2008, and some companies were liquidating trucks or going out of business as a result.
Falling interest rates are a hopeful sign. There’s a good chance that many would-be home sellers and buyers will decide to make a move, and that could lead to higher sales volume. However, rates will likely not fall to the lows seen in the past, and home prices will likely remain high, and these factors could temper demand. In other words, although some improvement is possible, the market could remain challenging for a while. Moving companies should be ready for this.
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