CHARLOTTE, N.C. — Buying a home is a dream for many families, but has been out of reach for some who just couldn’t afford to compete. Now, with mortgage rates coming down and the recent interest rate cut by the Federal Reserve, some homebuyers could see hope - and see realtors' phones ringing off the hook.
“There’s a huge structural demand for housing who have been on the sidelines who are going to get back in with rates coming down,” said Daniel Jacobs with TruLoan Mortgage.
The Fed is calling it a “recalibration”. But no matter what they call it, a half-percentage-point rate cut could mean more money in your pocket.
Long-term-fixed mortgage rates peaked at nearly 8%making buying a home more expensive. The rates have been trending down in anticipation of this cut, dropping to about 6%.
Jacobs said when the rate drops by 1%, it impacts home buyers’ affordability by 10%.
“So, if you want to buy a house for $500,000 dollars, rates come down one percent lower than they were, then you can buy a house for $550,000 with the same payment,” he said.
Mike Hege with Pridemore Properties at Compass said essentially the purchasing power has increased, and buyers get more bang for their buck.
“The way the market is responding there is a $220/month saving from this time last year that are principal and interest combined,” said Hege. “Affordability has gone in the buyers' favor in that way.”
Hege said not to expect the average cost of homes to necessarily drop. With lower mortgage rates, competition goes up and you have to consider supply levels.
“The market is still tight,” he said. “There’s about 2–3 months' supply in the metro Charlotte market and when we are considering a balanced market, that is more towards a 6-month mark.”
The lower rates could, however, be a good business motivator for developers to build more.
“You have an exciting time when interest rates are being cut and more affordable options are there,” said Hege. “Now, you can ultimately provide many more options for buyers and that is a good thing because they can afford more.”
Hege said based on two more projected Fed cuts, it is likely mortgage rates will drop to 5% by the end of the year. It's good news for those looking to get keys to a new home.
Contact Jesse Pierre at jpierrepet@wcnc.com or follow her on Facebook, X and Instagram.