Realtor September 22, 2024
Buyer
After years of sky-high mortgage rates, the Federal Reserve is expected to finally cut rates on Wednesday at its policy meeting.
Fed Chair Jerome Powell has previously indicated that rate cuts are likely. The Fed doesn’t set mortgage rates, but the two numbers often move in the same direction—and this much-anticipated rate cut should give the sluggish real estate market a much-needed kick-start.
Just 11 months ago—in October 2023—mortgage rates hit a peak of 7.79% for a 30-year fixed loan, which paralyzed both homebuyers and sellers and severely limited how much buyers could afford.
But last week, rates dropped to 6.2%, which is the lowest they’ve been since February 2023.
Mortgage rates are expected to continue to ease through the rest of this year and into next year, according to Hannah Jones, Realtor.com® senior economic research analyst, in her recent report. If that comes to pass, homebuyers will see a big boost in buying power.
If mortgage rates fall to 6%, the typical U.S. buyer would see an additional $9,000 improvement in buying power on average. If rates fall to 5.5%, the typical buyer would see a $34,000 increase in buying power.
“The top 10 metros that stand to see the largest dollar increase in buying power are the country’s highest-priced areas,” says Jones.
How much more will buyers in those pricey areas be able to spend on a house if rates fall to 6% or 5.5%? We crunched the numbers below.
August median list price: $1,399,000
Increase in buying power if rates fall to 6%: $30,100
Increase in buying power if rates fall to 5.5%: $110,100
August median list price: $1,190,000
Increase in buying power if rates fall to 6%: $25,600
Increase in buying power if rates fall to 5.5%: $93,600
August median list price: $1,050,000
Increase in buying power if rates fall to 6%: $22,600
Increase in buying power if rates fall to 5.5%: $82,600
August median list price: $999,000
Increase in buying power if rates fall to 6%: $21,500
Increase in buying power if rates fall to 5.5%: $78,600
August median list price: $969,000
Increase in buying power if rates fall to 6%: $20,900
Increase in buying power if rates fall to 5.5%: $76,300
August median list price: $834,500
Increase in buying power if rates fall to 6%: $18,000
Increase in buying power if rates fall to 5.5%: $65,700
August median list price: $800,000
Increase in buying power if rates fall to 6%: $17,200
Increase in buying power if rates fall to 5.5%: $63,000
August median list price: $775,000
Increase in buying power if rates fall to 6%: $16,700
Increase in buying power if rates fall to 5.5%: $61,000
August median list price: $750,000
Increase in buying power if rates fall to 6%: $16,200
Increase in buying power if rates fall to 5.5%: $59,000
August median list price: $725,000
Increase in buying power if rates fall to 6%: $15,600
Increase in buying power if rates fall to 5.5%: $57,100
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