Buyers could have a small window before activity returns
Sliding mortgage rates and a landmark cut by the Federal Reserve, likely to be the first of several, are boosting prospects of a busier market in 2025 than those seen in recent years. That possibility means hopeful buyers could face a narrow window to secure a property before activity – and prices – begin to ramp up.
November’s upcoming presidential election is seeing some would-be buyers remain on the sidelines as they await the outcome, although many remain well aware that the clock may be ticking for them to snag a home in a cooler market.
Mike Del Preto (pictured top), a senior mortgage advisor with Fairway Independent Mortgage Corporation, told Mortgage Professional America that while he had been advising clients for some time that now was the moment to enter the market, a growing number of borrowers are coming to that conclusion on their own.
That’s because expectations of a “gangbusters” spring market are growing. “Going back to maybe the first three to five months of the year, the narrative I was putting out there to people was… we’ve got limited supply,” he said. “Once demand goes up, so will prices. Would you rather buy a house at $500,000 today, at let’s say 7%, or buy that same house for $550,000 in a couple of years at 5.5%? It’s actually going to cost you more money with the latter versus the former.
“In the last three, four months, about 50% of my clients are already bringing that narrative to me, whether they find me on Google, whether they’re from an agent, a referral, a past client. They’re like, ‘Yeah, I just think now’s a good time. I think when rates do go down, there’s going to be a lot more competition’.”
New-home sales in the US dropped 4.7% in August but still exceeded economists' expectations, reaching an annual rate of 716,000 units.
— Mortgage Professional America Magazine (@MPAMagazineUS) September 25, 2024
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How have hopeful buyers been assessing the market of recent months?
Those prospective buyers are wary of a resurgence of a COVID-type market, Del Preto added, when competition surged and many markets saw bidding wars push home prices through the roof.
Some were even prepared to move ahead with a purchase as early as this July, although they ultimately dissuaded for one reason or another. “They lost in a couple of offers, or the agent told them to sit tight,” he said, “maybe wait until after Labor Day for more inventory because there’s [currently] a lack.
“I don’t necessarily agree with that, because I think that they could have had some pretty good opportunities had they not waited. But I understand the emotional rollercoaster that is buying a house. If you lose out on multiple offers several times, that can be discouraging.”
The average 30-year fixed mortgage rate ticked above the 7% mark during the summer but has fallen in recent weeks – and while the Fed’s decision to cut its funds rate by 50 basis points last week sparked some speculation about another slight upswing, refinance opportunities are growing.
Del Preto said roughly half of his current pipeline is made up of refinances, with many borrowers who purchased during the summer immediately seeking to capitalize on lower interest rates.
What’s the likelihood of the market gathering pace before 2024 ends?
On the purchase side, the outlook before things heat up in spring is somewhat less clear. The coming election could weigh down on buying activity, with Thanksgiving and the holiday season also likely to keep the market slightly subdued.
Still, that’s not to say demand will fall – and once released, it could prove a potent force. “The holidays tend to douse any kind of real estate fire pretty quickly. The election is early November, then that dust settles, and then it’s Thanksgiving and Christmas,” Del Preto said. “I could be wrong, but you can’t try to keep people down. After a certain amount of time, we get pent-up, and have to do something.
“It’s very interesting. I think we’re going to see, September right through June, one of the weirdest, not trackable, uncharted-waters types of market, with a lot of unexpected dips but also unexpected peaks.”
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