October 4, 2024
The phones rang. Finally. It had been a long, hot summer, and buyers returned to the prospects of buying homes.
Coincidentally, the phone started ringing after the Federal Reserve lowered its benchmark lending rate by 50 basis points in mid-September. The new base rate is 4.75% to 5%.
While mortgage rates are not directly tied to the Federal Funds rate (they are more aligned with movements in the 10-year treasury yield, though again, not exactly), the Fed’s action to lower rates after nearly two years of increasing them served as an emotional boast to buyers.
As of this writing, the average U.S. 30-year fixed-rate mortgage is 6.2%, according to Bankrate – the lowest they have been in a couple years. While this is a positive step in the right direction, the barriers to owning a home are still steep.
According to Moody’s economist Nick Villa, home buyers would need a 30-year fixed mortgage to fall to about 5.25% before the monthly payment on a $419,000 home would approach the average U.S. rent cost of $1,840. That’s a statistical way of saying it’s still more expensive to own than rent. Besides, $419,000, which is the current median home sale price of previously occupied homes in the U.S., only buys half a house in Sonoma County.
Nationwide, renters are mostly staying put. Sixty-two percent of U.S. renters renewed their leases in the second quarter this year, versus 60.5% a year ago, RentCafe reported.
Assuming we avoid a recession, we think home sales are likely to resume pre-pandemic norms by next year. And if Wall Street is even close to its expectations that the federal funds rate will move to the mid-3% rate by summer next year and reach 3% by the end of 2025, then our best guess has a shot at prevailing.
And about those callers in late September? We at Sonoma County Properties support first-time home buyers and veteran resellers and buyers alike. Not surprisingly, the calls that recently came in for real estate guidance and transaction management are coming from all of the above. More on this in a future post.
Serving Cloverdale, Graton, Healdsburg, Rohnert Park, Santa Rosa, Sebastopol, Tomales, Windsor and surrounding Sonoma County, CA areas.
The First step when selling your home is to set the right price for the current market conditions in your area.
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