Did the Fed Just Change the Housing Market?

By Jason Penrose

Jason has been licensed since 1999, and is currently one of the top 20 agents in Arizona for homes sold.

Article:

There’s one question I’m hearing more than any other right now, and it comes down to the Fed. A lot of people thought rates were going to get raised; they didn’t, and yet mortgage rates have been drifting up a little anyway. So it’s natural to wonder what’s really going on, and whether the Fed is actually supporting the housing market or holding it back.

The market is locked in a standoff. Higher rates have created a strange kind of gridlock. Buyers have a lot of pent-up demand and want to move, but they can’t quite qualify for the payment on the home they want, so they wait. At the same time, many sellers would love to move but don’t want to give up a 3% rate and step into something closer to 6.75%. When both sides are hesitating, the market gets stuck, and that’s exactly where we’ve been.

The Fed is walking a fine line. This is hard to predict because the Fed is trying to maintain price stability, which really means it doesn’t want inflation. If it cuts rates too aggressively, it risks reigniting inflation. Cutting rates could unlock affordability and free up sellers who feel like they could move at 5% but not at 6.75%. It could also pour fuel on prices and make homes even less affordable. There are a lot of balls being juggled at once, and no easy answer.

A Fed cut doesn’t directly move mortgage rates. This is where a lot of people get it wrong. When the Fed cuts its rate, that doesn’t translate straight over to the mortgage market. There have been times when the Fed cut and mortgage rates still rose right afterward. We really watch the US Treasury ten-year rate because that’s what mortgage rates track, and it fluctuates on its own. So even if the Fed makes a move, it doesn’t guarantee your loan rate will follow.

Today’s rates only feel high by comparison. Here’s the piece I want people to hold onto. Rates in the high 6s, even around 7%, are historically low. They feel high only because we’re comparing them to the 3% and 4% rates we had a few years ago, and that was never the norm. Once you set that comparison aside, the picture looks a lot less alarming than the headlines make it sound.

Buyers and sellers both have real options now. The best news is what’s happening on the ground. Sellers are being flexible with pricing and willing to negotiate within reason, and there’s more inventory on the market, which means buyers finally have choices again. Sellers have options too, because when their home goes under contract, they have more homes to choose from for their own next purchase. Depending on the neighborhood and price point, we’re in a more balanced market, without the extremes we’ve seen on either end in recent years.

If you have any questions, or you’re thinking about buying or selling a home, I’d love to help you figure out the right move for your situation. I also truly appreciate your referrals, so please share this video with friends and family who might be weighing the same decision. You can reach me at (602) 738-9943, email me at jason@thepenroseteam.com, or visit buyaztoday.com. Make it a great day, and I look forward to talking with you soon.