We know mortgage rates have been declining. The Fed’s next move in reducing interest rates could spark a shift. Now the housing market update for Metro Detroit. Let’s see what’s next.
Housing Market Update for Metro Detroit:
Now that it’s September, all eyes are on the Federal Reserve (the Fed). The expectation is that they will likely cut the Federal Funds Rate at their upcoming meeting. This is primarily due to signs that inflation is cooling and the job market is slowing down. According to Mark Zandi, Chief Economist at Moody’s Analytics:
“They’re ready to cut as long as we don’t get an inflation surprise between now and September, which we won’t.”
But what does this mean for the housing market in Metro Detriot? And more importantly, what does it mean for you as a buyer or seller?
Why the Federal Fund Rate Cuts Matters
You might not know, but the Fed doesn’t directly set mortgage rates; it sets interest rates. Instead, mortgage rates are influenced by a combination of the 10-year Treasury yield and the gap from mortgage-backed securities prices, which are tied to Wall Street bonds and the securities market. Government policies and broader economic trends ultimately shape these rates.
When the Fed cuts the Federal Funds Rate (interest rate), it sends a signal about the overall economy, which mortgage rates typically respond to. While one rate cut may not cause a drastic drop, it could contribute to the steady decline we already see. With inflation easing and the job market softening, mortgage rates have dropped from 6.91% in July to 6.27% as of September 6 over six week time period. I think that is a significant shift; what do you think? This trend will continue until the Fed meeting on September 18, 2024.
The Projected Impact on Mortgage Rates
Experts in the housing industry have offered various projections for mortgage rates through 2025. While some experts initially missed how much the job market would affect rates, Wells Fargo’s forecast was the most accurate.
With inflation cooling and the job market showing signs of strain, a Federal Funds Rate cut could cause a moderate decline in mortgage rates, or we could see another rapid shift like we saw over the past six weeks. Here are two big reasons why that’s positive for both buyers and sellers in Metro Detroit:
1. It Could Ease the Lock-In Effect
For current homeowners, lower mortgage rates might reduce the “lock-in effect.” This is when homeowners feel trapped in their homes because today’s rates are higher than the rates they locked in when they bought their current house. If you’ve hesitated to sell due to fears of higher costs, even a slight rate reduction might make selling a more attractive option. However, this will unlikely lead to a flood of sellers entering the market, as many will still be cautious about giving up their lower-rate mortgage.
2. It Should Encourage Buyer Activity
For buyers, any drop in mortgage rates will make the housing market more appealing. Lower rates reduce the cost of homeownership, which may finally give you the opportunity to buy if you’ve been waiting for a better time to make your move.
What Should You Do?
Nobody knows what will happen with the first interest rate cuts and how quickly mortgage rates will drop long term. The above prediction shows the importance of knowing WHY mortgage rates are going up or down versus tracking the daily rate so you can predict the short term. Knowing the economic trends and shifts will be vital before you lock your mortgage rate for your new home in Metro Detroit. Do you know, based on past trends, I’ve seen significant drops over a short period? Also, I wouldn’t be surprised if we knew the mortgage base rate was 5.5% before Q4 in 2025, seeing the mortgage rate base as of 9-6-2024 was 6.27% and a drop in mortgage rate base of .64% in 6 weeks.
I agree with Wells Fargo’s assessment. I ran very similar scenarios, and the outcome based on inflation numbers and the jobs report is that the first interest rate cut will be at 50 basis points unless there is a huge increase in the CPI inflation numbers being released before the Fed meeting. Wells Fargo was closest on inflation predictions, and they slightly overshot the jobs report for Q3 for unemployment and were spot on reporting on the slowing of job creation. Overall, Wells Fargo came the closest to the predictions. I recommend following Mortgage Rate changes and knowing the WHY before negotiating with a lender.
Timing the Market is Nearly Impossible
What is important is keeping up to date on Home Prices and Real Estate trends for Metro Detroit. We have pent-up buyers waiting for mortgage rates to drop before they purchase their new home, and we may see home prices shoot up. We still have low inventory of homes for sale, and if we have more buyers than homes, we could see a repeat of the “Unicorn Years.“ in Metro Detroit.
If you’re considering moving, you may want to weigh your options based on Home Prices vs. Mortgage Rates. Is it better to buy now and refinance later, knowing home prices have balanced out, or wait until mortgage rates are lower and the potentially high home prices are due to a low supply of homes and increased demand?
Know The Market You’re In: It Represents Your Money 💰
Know the housing market in Metro Detroit, updated by the 13th of every month. Knowing the numbers could put more money in your pocket if you sell. If you plan on buying, you can save money when you start the negotiation process because you know the numbers.
Macomb County Housing Market Update by City
Oakland County Housing Market Update by City
Let’s Decode the Housing Market Together! Let’s Connect ⤵️
Wow 😮, there’s a lot to consider! Whether looking to buy a new home or considering selling in Metro Detroit, keeping up with the latest housing market trends is essential. After all, these numbers impact your decisions. Let’s simplify the process together. Schedule a Zoom call with me, and we’ll review the data. I’ll share my screen so you can see the market insights clearly and feel confident about your next steps.
Plan Ahead
The anticipated Federal Funds Rate cut, driven by improving inflation and a slowing job market, will likely gradually affect mortgage rates. This could open up opportunities for both buyers and sellers in Metro Detroit. When you’re ready, let’s connect to discuss your options and help you take advantage of the changing market when the time is right.
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