Falling mortgage rates creating ‘more choices’ for homebuyers

Sticking with the housing market July home sales numbers coming in at 739,000. That’s a month to month increase of over 10% as lowering mortgage rates seem to be showing increased demand. These numbers are on top of existing home sales which grew 1.3% in July, stopping a four-month sales decline. This according to the National Association of Realtors, for more on the latest data print and looking ahead to what a potential September rate cut could mean for the housing market. We’re joined by Lawrence Un, who’s the National Association of Realtors, Chief Economist. Great to see you as always and have you on the program here with us, Lawrence. First and foremost, let’s start with the latter part of what I just mentioned in that intro, which is what happens to the housing market if we finally do get the rate cut that not just the equities markets are anticipating, but a lot of house hunters out there we’re hoping on.

Oh, well, you know, the bond market has already adjusted in anticipation of the September rate cut and more rate cuts in the later months, also going into next year. So definitely we are in a downward trend in mortgage rate. Housing sector always one of the most sensitive to the mortgage rate changes, and consequently, uh, mortgage rate today at one year low level, you know, at under 6.5, we have not seen this for the past 12 months. Very good news. Moreover, more inventory means more choices for consumers. This is going to lead to a lot of dynamism, more sell of a home, more buyers coming in, more sellers listing, all good news.

What do you think the magical number is, where our rates going to need to come down to in order for people who are perhaps sitting on their homes right now and waiting to refinance, what do you think that number’s going to need to come down to on the rates for it to make sense for them to refinance, list them homes and them putting more supply in the market?

Uh, you know, we have to remember, uh, during the past couple of years, uh, the mortgage rate have been above 7%. So as the mortgage rate have come down already, we are seeing that revival of some refinance among those people who recently purchased in the past couple of years. But of course, you know, there are many other people who have already refinanced into even lower rates, or people took that 3% 4% rate during the early months of the COVID period. Uh, but the key question is whether people who are locked in onto those low rates decide to list because their life is moving on for the better, better jobs, maybe they’re looking for better school district, maybe they have additional child into family, wanting to trade up, or maybe retirees wanting a better retirement life by downsizing. So all this pent up potential sellers, I think will certainly move into the market as mortgage rate decline. Of course, you know, it’s not a 3% 4% mortgage rate, but it is a positive development for the real estate.

And certainly with that in mind, as we’re kind of keeping tabs on new and first-time home buyers, what do you think is going to be the the critical shift that we see in this new crop of home owners and what they’re looking for and ultimately what that means towards migration shifts even as they’re getting into those first time homes?

Uh, you know, you know, Americans view their part of their dream is owning part of America, home ownership. Uh, but the overall migration trend has been that from the northern colder state, uh, people moving into the southern states. So the Carolinas, Georgia, Florida has greatly benefited from these trend, and I think that will continue. And from California’s migrating into Rocky Mountain states, so Arizona, Nevada, Utah, and Idaho. And I think this trend will continue, uh, into the future. But the key is staying within budget. Home builders in the past couple of years, they stopped building those McMansions. They’re focused on more affordable priced home. That’s why they are clicking on the home sales, uh, and the inventory situation beginning to loosen up more choices for buyers.

All right. Well, as of right now, and based on the most recent reading, median existing home sales price elevated 4.2% from July 2023. That coming in at about $422,600, 13th consecutive month per your readings of month over or year over year gains. Lawrence, it’s always a pleasure to get some of your insight, some of your time here, Lawrence Un, who’s the National Association of Realtors, Chief Economist. Good to see you.

Thank you.