What the Fed’s interest rates mean for 2024 home sales
As the weather starts to warm up, Coloradans may start to see another tell-tale sign of spring: 'For sale' signs in the front yards of homes.
But across the Denver metro, buying and selling homes has already been ramping up for months.
"Traditionally, when you go from February to March, you actually see a decrease in the amount of active listings," said Andrew Abrams, a local realtor and member of the Denver Metro Association of Realtors Market Trends team. "But this year, we actually saw a big increase, so really more options out there."
“But a little bit of the crazy part is we’ve seen prices go up in January and February. So, there’s more options for buyers while prices have gone up as well,” he said.
Among the many trends tracked by the Denver Metro Association of Realtors (DMAR), interest rates have been a constant source of intrigue in recent years. Abrams said mortgage interest rates are currently sitting between 6-7%.
This week, the Federal Reserve again announced it will hold interest rates steady, but suggested three rate cuts could come sometime this year.
“The Fed rate certainly does have an impact on the 30-year mortgage, it's not a direct correlation but it definitely has an impact,” Abrams said.
And, according to him, realtors and their clients will be very interested to find out when those cuts will eventually happen.
“The question is still 'when.' [Federal Reserve Chair Jerome] Powell did mention there would be those three rate drops – and that’s what people are talking about,” Abrams said.
“The Federal Reserve doesn’t really do these things, does not tell us the plan for the year – so that in a way is an unusual step,” said Kishore Kulkarni, a distinguished professor in the Department of Economics at MSU Denver.
“So, because of that step, the market has really loved that news that interest rates will definitely come down 2 or 3 times in 2024," Kulkarni said. "And a reduction in interest rates means a nice opportunity to borrow more and do more things with the money.”
Kulkarni said some predictability gives the market a feeling of stability.
“I think the predictability of the future gives the stability to the market and to the economy as a whole,” he said.
As interest rates rose over the last few years, Abrams says he and other realtors helped clients find creative solutions, like seller concessions and buy-downs, to help buyers purchase homes more affordably.
If mortgage interest rates do decrease this year, he said timing will be interesting – a summer drop would coincide with the traditional slowdown of the season. Abrams said a mid-year change in interest rates could mean a late surge of sales or a jump in home prices if suddenly more people can afford to get in the game.
He said buyers will likely face this question in 2024: “Do you buy now, when it’s a little less competition or do you wait until interest rates go down and there’s more competition? Is that actually more beneficial even though your payments [could be a] little less today?”