Normally we pull a graph or two from our Market Pulse system and I tell you what the charts mean. This month I am going to show you a different kind of graph, the 30-year fixed rate mortgage average in the United States:
As you can see the 30-year fixed rate mortgage average in the US has been on a steady march down since a peak in May of 2024, and it’s a LONG way down from a high in October of 2023.
There is now noise (finally) from Chairman of the FED Jerome Powell that he will conduct rate cuts in September. It is important to note that this downward rate pressure has happened with zero FED rate cuts. The rate cuts will only speed up this process (and lower the spread, which is a longer conversation we’ll save for a different update).
To put it plainly, to have a recovery in residential real estate you have to have interest rate decreases. They need to stay low for a while for the US homebuyer to say, “Oh look, I guess now is the time.”
As you can see from the graph, they are lower, going down, and staying on that trajectory.
We have pent-up buyer demand that will come into the market. Even a quarter-point rate move down unlocks more buyers, a good thing for the real estate market.
Here is something we’ve never had before in my 26 years of looking at markets: sellers are rate sensitive too. Normally people move (sell) because of timing in their life, not timing in the market. However, some folks had that life event over the last 36 months but were “locked in” at a lower interest rate and it made it unaffordable for them to sell. Now every quarter-point rate move down will also bring in that pent-up demand for sellers coming into the market.
This will create movement of some significance in the marketplace and cause a somewhat seized-up market to relax and flow more freely. This will be good for values and transactional volume in the industry over the next 12-18 months.