The Federal Reserve on Wednesday cut interest rates for the first time since the Great Recession of 2008, but the National Association of Realtors® don’t think it will have a huge impact on residential purchases… at least in the short term.
In a recent discussion, Lawrence Yun, chief economist for the National Association of REALTORS®, said that the move is not likely to deliver significant juice to an already favorable borrowing environment for home buyers. The federal funds rate, which is what banks charge one another for short-term borrowing, will now hover between 2% and 2.25%, according to news reports.
The Fed made the decision to lower interest rates to stave off the threat of an economic downturn. But it's unlikely to translate into additional mortgage savings for many buyers. With the interest rate for a 30-year loan already hovering below 4%, the Fed’s move may be more meaningful for buyers with other types of financing, says Lawrence Yun, chief economist for the National Association of REALTORS®. “Many borrowers will benefit, especially those with adjustable-rate mortgages and commercial real estate loans,” Yun says. “The longer-term 30-year fixed-rate mortgages will see little change in the near future because they had already declined in anticipation of this latest move by the Fed.
“These low interest rates will partly help with housing affordability over the short-term. Both rents and home prices have been consistently outpacing income growth. The only way to mitigate housing-cost challenges as a long-term solution is to bring more supply of both multifamily and single-family homes to the market," adds Yun.
The housing market and borrowing rates can move quickly. That’s why being pre-approved for a home loan and working with a Realtor® is the best way to make sure you’re purchasing at the best possible time. That’s Who We R.