See Where the Housing Market Could Change the Most as Mortgage Rates Drop

Realtor October 11, 2024

Buyer

See Where the Housing Market Could Change the Most as Mortgage Rates Drop

High mortgage rates are falling—and while all homebuyers will benefit from this, a new report found that those living in certain areas will reap the returns more than others.

According to a recent analysis by Realtor.com®, cities such as Denver, Raleigh, NC, and Baltimore will likely feel a more substantial impact from declining rates in the coming months.

That’s because these cities have some of the highest percentages of mortgage usage when compared with other markets, meaning more people are still paying off their mortgages in these cities than anywhere else.

Meanwhile, “housing markets in West Virginia, Mississippi, Louisiana, New Mexico, and Arkansas are likely to see less impact from lower rates, as a larger share of homeowners in these states own their homes outright,” says Realtor.com economist Jiayi Yu.

“Notably, according to our analysis, 84% of existing mortgages have a rate of 6% or lower,” Yu says. “In other words, as mortgage rates approach the 6% level, we can expect to see more homeowners ‘unlocked,’ especially in areas with high mortgage usage.”

Many who bought homes during the COVID-19 pandemic at low interest rates were “locked in” to their properties because it didn’t make financial sense to buy a home at a higher interest rate. This has kept many homes off the market and created an inventory squeeze—and a seller-friendly market.

However, following the Federal Reserve interest rate cut in September, a number of new sellers entered the market. According to THE Realtor.com September Housing Market Report, there were 34% more homes for sale than a year ago, a sign that falling rates might be helping the market bounce back.

So, where will plunging mortgage rates be felt the most? Read on to find out.