Experts' View on Impact of Lower Mortgage Rates on Homebuyers

Potential home buyers and sellers in the U.S. are closely monitoring mortgage rates, which have significantly contributed to the ongoing affordability crisis in the housing market. Currently, mortgage rates are more than double what they were in 2021, deterring many potential buyers and sellers, particularly those who secured lower rates during the COVID-19 pandemic. Experts, including Telsey Advisory Group's Joe Feldman and Realtor.com’s Ralph McLaughlin, suggest that while both groups await a decline in rates, affordability will remain a long-term challenge. As borrowing rates decrease, buyers will have increased purchasing power, allowing them to bid higher for homes. McLaughlin notes that this could lead to price growth in the market, although such changes may not be immediate. The increase in borrowing capacity typically requires a surge in buyer competition, which is currently lacking. Feldman warns that a drop in mortgage rates will likely stimulate demand, exerting upward pressure on home prices and further complicating affordability issues. Recent data highlights the current state of the market, with the average 30-year fixed-rate mortgage at 6.49% and home prices nearing record highs. According to Redfin, the median sale price rose 4.1% year-over-year in July, reaching $439,170, just shy of the previous month’s all-time high. To improve affordability, McLaughlin emphasizes the need for a significant increase in housing inventory or for income growth to outpace rising home prices.