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Decreased interest rates will certainly increase purchasing power. Competition in the already-competitive metropolitan centers is not likely to decrease anytime soon. Draw whatever conclusions you may from putting those two facts together. Nobody has a crystal ball and past performance never lends to airtight solid forward-looking predictions.
While no one can predict the future, that is the most likely outcome, assuming no major catastrophic economic problem happens
Housing demand is through the roof and high rates are preventing supply
A wild card would be if rates go even higher
Here’s one thing to consider: what if rates come waaaay down (3%) and suddenly everyone stuck in a home decides to sell? That’d cause emergent and unanticipated effects I think. If there was a crash in rates, we may consider the possibility of a buyers market. But I imagine it would have to be a significant crash for that to occur. I find this to be very unlikely, but in my profession, I need to game out all possibilities
This isnt financial advice
Mentor
Rates aren’t coming down in 2024. Fed will keep pushing it out, so he doesn’t crash the stock market. If unemployment ticks up, so will uncertainty. Buying real estate when you’re likely to lose your job is when rates will come down without inflation. Basically there needs to be fear in the streets to bring rates down without causing inflation. If he lowers rates soon he’d see shelter inflation tick up and he’d have to raise rates again. It’s a balancing act and he’s playing a perfect game, except waiting too long to raise rates.
Personally I don’t think rates are going to come down at all. I bought my first one 20 years ago at double digit rates, my second 15 years ago around 8%, and my 3rd at 2.5%.
I think long term mortgage rates at 7% are reasonable and historically accurate. The problem is that prices are nowhere near where they were 15 years ago. That $160k house was recently listed at $1.1m.
Personally I think the more likely outcome is a decline in housing prices over the long-term. The US has developed a huge asset bubble because of the abnormally low rates that’ll take a while to deflate.
The huge asset bubble popped in 2009 and new home construction didn’t keep up with demand from 2009 to present. During that time builders saw comparatively little action and the result is lack of home construction labor.
The Fed expects 0.75 reduction by the end of the year. Even if it doesn’t happen, I think mortgage rates will settle down to about low 6% in 2025 and 5% in 3-5 years. Pent up demand for homes will start to open up when mortgage rates go below 6.5% and slowly sellers will begin to sell. Still a sellers market for the next 5 years because it will take years of new construction to meet demand. Unless WWIII happens, I just don't see home prices abating. I see it accelerating in the next 5 years.
The magic will happen after the election, yes rates will probably come down and prices will probably go up. The people in their 2-5% interest rate homes aren’t going to move willingly. There will always be limited supply for a few years at least, particularly in the markets with limited new builds