I’m going to use this month’s economic update as more of a Public Service Announcement. Please hear me: mortgage rates are (finally) trending down. The FED is talking about possible cuts again (maybe two) this year. Just look at where they are compared to the high at the end of 2023 in the attached graph.
Why is this important? To put a twist on one of my favorite shows: “Summer is coming.” The lock-in effect for sellers has created a situation we’ve never seen in my 26-year real estate career and perhaps not since the 1970s.
We’re used to rates going down, bringing in more buyers. There are also two years of pent-up buyer demand due to higher rates. So, why the red alert, Crazy Uncle Keith? Because for the first time in a long time, each 0.5% drop in rates will also unlock more sellers, and both will enter the marketplace simultaneously.
Cliff notes: it is going to be a RIPPING real estate market when this all comes together. I know we hear the narrative of “Everyone has a 3% mortgage; they’ll never be willing to give that up!” For starters, just 22.6% of homeowners have a rate below 3%. While it’s true that more than 88% have a mortgage below 6%, we don’t need to get below 6% for the floodgates to open.
People live in houses, not interest rates. All the triggers that normally spur home sales have continued to occur over the last two-plus years. But it was simply too expensive for people to pull the trigger when rates were in the high 7s. Every 0.5% move down makes it a little more affordable.
The wave is building. You can’t see it yet, but it’s out there. You’ve got to start paddling BEFORE the wave gets here if you want to catch it. Put simply, the truth is this: it’s time to roll up our sleeves and get to work, reminding people what we do, why we’re valuable, and how we can help them. Time to paddle, y’all.