Word is that the United States Federal Reserve is predicted to cut home loan interest rates at the end of September 2024, when the Federal Open Market Committee (FOMC) meeting is scheduled. This is good news for homebuyers, right? Let’s take a closer look.

After the Federal Reserve had increased interest rates to a 40-year high to counter the explosive inflation, this sign that they will soon lower could also mean that mortgage rates could lower to 6.85 percent, the lowest rates since March 2024. That could be $200-a-month savings for homeowners who take out a loan for $400,000.

To put things in perspective, mortgage rates reached a high of 7.8 percent in November 2023, the highest in more than 20 years. At the end of April 2024, home loan interest rates were at 7.5 percent. As of July 2024, 30-year mortgage rates stand at about 6.9%, which is a massive hike from the 3.0 percent average in 2021 and far above the 4.2% average in the pre-pandemic years (between 2017 and 2019).

Buyers also have more purchasing power at this time, having gained more than $22,000 while rates continued to decline. For example, a homebuyer with a budget of $3,000 a month can now afford a home listed at $448,000 with an interest rate of 6.85 percent. A few months ago, when mortgage rates peaked at 7.5 percent, the same buyer would have only been able to afford a house going for $425,500.

But, warning for house hunters: this window of opportunity could be short-lived because lower rates will then lure more buyers into the market, which will, in turn, bolster competition and jack up prices. Also, the amount of listings flooding the housing inventory is also up 7 percent and the properties available for sale at their highest since the end of 2020.

Higher interest rates are designed to slow down spending in interest rate-sensitive industries, such as housing. The federal government increases interest rates to cool off the broader economy and reduce inflation.

It is reported that rates could drop even more if the Federal Reserve cuts rates at the end of 2024 around Election Day and into 2025. Rates are predicted to drop another 0.25 percent between 4.75 and 5 percent. And lower rates will lead to more home sales.

But, buyers beware! Those who are looking on the market shouldn’t be too hasty in purchasing a home right away because it could potentially drive prices up more – and faster – than they normally would if consumers start buying immediately all at once.

For more information on housing market trends or if you need an appraisal, contact our professional appraisal team to schedule an appointment at 843-808-1533.