Is the city you operate in among those likely to see increased real estate activity?
As the Federal Reserve initiates a series of rate cuts, a new study by Realtor.com® has suggested significant changes in housing markets where a large percentage of homeowners carry mortgages. According to the research, markets in Washington D.C., Denver, Raleigh, Virginia Beach, and Portland are expected to experience the most noticeable shifts due to their high rates of mortgage utilization.
“Having a mortgage with a low interest rate is a fantastic benefit to existing homeowners, but sometimes being in a great position can limit your options. Although mortgage rates have eased, market rates continue to exceed current rates for most homeowners, keeping them locked in ‘golden handcuffs’,” said Danielle Hale, chief economist at Realtor.com®.
In areas such as Washington D.C. and Denver, where approximately 75% of owner-occupied homes are mortgaged, the effects of declining market rates are likely to influence homeowners’ decisions about buying and selling, according to Hale.
The study indicated that, following the Fed’s recent announcements, mortgage rates are projected to stabilize in the low 6% range for the remainder of the year, potentially dropping to the high 5% range by spring 2025. This decline is expected to encourage a resurgence among homebuyers who had previously been sidelined by higher rates.
Key cities to watch
The research highlighted that markets with a higher share of owner-occupied homes with a mortgage will likely see a more pronounced effect from falling rates. In Washington-Arlington-Alexandria, the percentage of homes with a mortgage is 74.7%, while Denver-Aurora-Lakewood follows at 72.4%. Other metros, including Raleigh-Cary (72.0%) and Virginia Beach-Norfolk-Newport News (71.0%), also are featured in the study.
Conversely, markets with higher rates of outright homeownership may not feel the same impact from falling mortgage rates. New Orleans, for instance, has a notable share of outright homeowners at 45.8%, which may insulate it from the fluctuations caused by changing mortgage rates. Other cities with substantial outright ownership include Buffalo (45.2%) and Pittsburgh (45.2%).
The study further highlighted that markets with elevated homeownership rates tend to have a greater share of outright ownership. Older homeowners, particularly those aged 65 and above, often experience higher rates of outright ownership due to property appreciation over time. This demographic advantage allows them to leverage accumulated equity for refinancing or downsizing without incurring new mortgage debt.
The following cities were identified as having the highest percentage of owner-occupied homes with mortgages:
- Washington-Arlington-Alexandria, DC-Va.-Md.-W.V. - 74.7%
- Denver-Aurora-Lakewood, Colo. - 72.4%
- Raleigh-Cary, N.C. - 72.0%
- Virginia Beach-Norfolk-Newport News, Va.-N.C. - 71.0%
- Portland-Vancouver-Hillsboro, Ore.-Wa. - 69.8%
The Realtor.com® study emphasized varying impacts across different markets, suggesting that regions with higher mortgage usage will likely see increased real estate activity as potential homebuyers are encouraged to re-enter the market.
Do you have something to say about the recent findings? Leave a comment below.
