Sep 203 min read

Fed Interest Rate Cuts: What Does It Really Mean for the 2024 Real Estate Market?

For over a year, real estate markets have been filled with talk of interest rate hikes, and many predicted that this would lead to a market crash. Ever since the post-COVID rise in demand, people have been holding their breath, waiting for the other shoe to drop. But what if we told you that this isn't another "crash" prediction? What goes up must eventually stabilize, but there’s a lot more to the story.

As your trusted San Antonio-based Realtors, we closely monitor these market shifts, analyze the trends, and consult with fellow experts to provide you with accurate predictions. Here’s what we’ve learned about the recent Federal Reserve rate cut, what it means for mortgage rates, and how buyers, sellers, and investors should navigate these changes.

What the Fed’s Rate Cut Means for Mortgage Rates

The Federal Reserve’s recent rate cut isn't the crash signal some have been expecting. In fact, experts say the rate cut likely won’t bring immediate changes to mortgage rates. The market had already adjusted in anticipation of the Fed’s decision, with rates having slowly declined over the past few months.

Right now, average mortgage rates hover around 6%, which, while lower than their peak, is far from the record lows of 2021. As a buyer, you might not see huge rate drops in the short term, but experts forecast a gradual decline throughout 2024 and 2025. By then, we may see mortgage rates in the 5% range, making the market more favorable for those looking to buy.

Why the Housing Market Won't "Crash"—But It Will Shift

Contrary to the crash predictions circulating over the past year, the market isn't heading for a dramatic fall. Instead, we're seeing what we call a "soft landing." This means that while home prices are stabilizing and even softening in certain areas, they're not expected to plummet. The real estate market is too resilient for that, especially in regions like San Antonio, where demand remains relatively high.

One challenge that could persist is the "lock-in effect." and competitive new builds. Homeowners who refinanced at record-low rates during the pandemic are reluctant to sell, knowing they'd face higher rates for their next mortgage. Also, if the decide to sell, in most cases they compete with new builds who give incredible incentives which sellers can't compete with. This is slowing down inventory increase, and keeping prices relatively stable. However, as rates continue to drop, we expect a slow but steady loosening of inventory and a major buyers influx, making it easier for buyers to find options but also more competitive.

What This Means for Buyers

If you’ve been waiting on the sidelines for a better opportunity to buy, now is the time to prepare. While mortgage rates won’t dramatically drop overnight, we do expect further reductions in the next year. Buyers should start getting their finances in order, securing pre-approvals, and being ready to act when the right property comes along.

Pro Tip: Don’t wait for rates to hit rock bottom—they won’t return to the 2-3% levels we saw in 2021. Experts agree that those were extraordinary circumstances unlikely to happen again. Lock in the best rate available now, and consider refinancing down the road if rates dip further.

What This Means for Sellers

Sellers may be wondering if they should hold off on listing their homes until rates decrease further. The truth is, while the market has softened, homes that are well-priced and in good condition are still selling and selling fast. If you're thinking about selling, it’s important to work with an experienced realtor who understands how to price your home competitively and market it effectively in a shifting landscape.

Pro Tip: Consider listing before rates drop significantly and more sellers flood the market, which could increase competition and put downward pressure on prices.

What This Means for Investors

For real estate investors, the time to act is now. With rates starting to come down, opportunities are emerging. Lower rates mean better financing options for investors, and a stabilizing market could present more favorable conditions for acquiring new properties, DEALS DEALS DEAL!. Whether you're flipping homes or looking for rental income, 2024 could offer strong opportunities to expand your portfolio.

Final Thoughts

As Realtors who are actively engaged in the San Antonio market, we’re seeing shifts that signal a positive but cautious trend in the housing market. Whether you're buying, selling, or investing, staying informed and acting strategically will be key to making the most of these changes.

If you're thinking about making a move, we'd love to chat and help guide you through the process. As always, we recommend consulting with professionals (that’s us!) before making any big decisions regarding your real estate investments.