For Boulder home buyers contemplating a housing move, all eyes are focused on the Federal Reserve moving mortgage rates through policy cuts to the Federal Reserve Rate. The big question remains though: will we see additional action before years’ end?
Will Rates Hold or can Homebuyers Hope the Fed Brings Them a Holiday Discount
It seems forever ago now, that home mortgage rates were down in the upper three’s and low four’s. I think we all forget it has also been ages since homes were getting multiple offers and selling for gobs over list price. We remember the long lost low rates fondly. And forget the other part of the market that was so frustrating for first time home buyers.
Brian Crowder, with Change Mortgage, reminds me that the Federal Reserve doesn’t directly set home mortgage rates. The Fed does change it’s lending rate, which can in turn impact what happens with mortgages.
Also impacting the financing for your future home is inflation and jobs numbers. Both of those statistics have been in the news a lot recently. Especially during the recent election, everyone was bantering about the economy.
Crowder is hopeful the Fed brings a holiday discount. He says, “We are due for a reversal.” Mortgage rates have been lingering stubbornly high the last several weeks now. It would be good holiday cheer to see an impact from Federal Reserve moving mortgage rates through a general rate cut!
But there is no guarantee a Fed rate cut actually improves lending rates. Sounds counter-intuitive I bet. Home mortgage rates frequently improve on rumors and flounder on facts. Take the massive Half-Point Federal lending rate cut a few weeks ago. It got home buyers off the fence. But rates promptly increased on that good news.
As Mortgage Rates Stay High, Homeownership Becomes a Fading Fantasy for Many
Millennials are finding it challenging to break into the US home market these days. Is it really that different from when when I first purchased a home? Or Is this just the usual chit chat. Well, I think there are some real financial goings-on that are impacting the market.
Along the Colorado Front Range, we have certainly seen home values skyrocket. That’s great news for owners. But for younger buyers, looking to get into their first home, it’s expensive. And then you add on the higher rates for a new loan. It can make it extremely challenging. Not every Gen Z or Millennial out there has family ready to gift a massive down payment.
So Federal Reserve moving mortgage rates through Fed cuts and helpful jobs creating data can really impact the opportunity to get into a home.
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Making the Move From Renting To Owning
There are some ways to get into your first home. One great option, especially around Boulder County is to purchase an attached dwelling. These start at a lower price point. Thus, you would need less down payment to get started. And even though rates are stubbornly high, once in the market all ships rise. That is to say, as the housing market goes up, so too will your starter town house.
When you are ready to make your next move, you can tap that extra equity. But it all starts with making that first transition. Michelle Gibson goes into a deep dive in Wellington Florida. Great read and much faster than researching everything in a library on your own!
Rate Buy Downs
Since home mortgage rates exploded, we have also seen a number of savvy home buyers take advantage of rate buy downs.
With a Two-One Buy Down, first time home buyers are able to get a lower mortgage rate in years one and two of their mortgage. It’s all paid for by the Seller. It would take a rate in the mid-sixes down to the mid-4’s in year one. That’s a fantastic savings.
While the introductory rate doesn’t last forever, it does create some flexibility to help home buyers crack this market.
November Brings Hope as Fed’s Actions Could Help Mortgage Rates Drop
You have to stay positive. My biggest take away watching government in action? There seems to be real indicators that the US government wants to see mortgage rates improve. The Fed was raising rates for the longest time to combat inflation. Well, perhaps that beast is tamed. And now making some improvements at the Federal level will allow savvy home buyers to be ready to take advantage of improved mortgage rates.
Another local pro, Ananda Lantaff, shared with me that talk of rate cuts has him busier than in September (of this year) when rates were truly lower. Alas, we in the industry were hoping after the election to see some movement. Now, Ananda says the talk is after the holidays.
Too Good Economic News
It might sound (as Star Trek’s Spock would say,) “illogical,” but we just have too good of economic news these days. We keep getting these really positive jobs reports.
Unfortunately, the mortgage market likes bad news. When the financial data is negative, that improves rates. Unfortunately, for Colorado home buyers, there are just a lot of jobs still being created. It seems strange to wish for bad news in hopes of Federal Reserve moving mortgage rates down.
So here’s hoping for some not so great economic news to move home mortgage rates in a favorable direction!
About The Author
Bob Gordon is a local Realtor in the Boulder and Front Range (of Colorado) housing market. Working with friends, family and clients since the mid Nineties. When not blogging or showing property, Bob is an avid skier and hiker, depending upon the season. Put Gordon’s experience to work for you. He is an advocate for his clients’ best interests and knowledgeable in residential real estate transactions.