Interest rates were already moving down ahead of Wednesday’s half-percent rate cut by the Federal Reserve, and prepared buyers were cheering.
“I am so excited for my people,” Casper real estate agent Abby Reeder told Cowboy State Daily. “We’re going to look at a house that a month ago they couldn’t have afforded because of interest rates. They didn’t qualify at this price point before. Now they’re going to get, like, a dream house, versus a home that works for now.”
The key to this lucky moment was months of preparation, Reeder said.
“Sometimes you just have to wait,” she said. “Like the clients I’m working with right now, we had to fix a few things. I didn’t just pick them up and get them qualified. I’ve been working with them for about six to nine months, but now we’re ready to rock and roll.”
Another important factor was choosing the right loan.
“There are so many different types of loans,” Reeder said. “People think it’s still the traditional 20% down. But that’s kind of old-school now. It would be great if everyone could do that loan because then you don’t have PMI insurance. But that’s not realistic anymore.”
Reeder added that despite a longstanding shortage in the Casper real estate market, she’s been able to connect clients with homes, as long as buyers have a decent income and don’t have tons of debt.
‘Not A Seismic Shift’
Likewise in the Cheyenne market, Dominic Valdez told Cowboy State Daily he feels a little more excitement with rates headed down. But it’s not a big thaw yet.
“Anecdotally, we’re hearing the phone ring a little bit more,” said Valdez, with #1 Properties in Cheyenne. “But as far as getting through to writing contracts and getting closings, it’s not there yet. There’s just a little bit more movement, but not a seismic shift.”
Interest rates have been stuck at 7% and above for months, which has not only priced many buyers out of the real estate market, it’s kept potential sellers from listing their homes, because they can’t afford to upgrade their living quarters with such high rates.
Changing that is going to take interest rates well below 6%, Valdez said.
On Tuesday, interest rates for a 30-year fixed-rate mortgage were still hovering around 6.25%, according to Bankrate.com — not too far from where interest rates were a week ago when they were listed at 6.3%.
That puts monthly mortgages in the neighborhood of $615 per month for principal and interest on every $100,000 borrowed.
The half-percent rate cut the Federal Reserve approved on Wednesday, the first since the COVID-19 pandemic, moves its benchmark federal funds rate to between 4.75% and 5%.
The cut was higher than many expected, including Valdez.
“I don’t think that will be enough to get everybody jumping off the fence yet,” he said. “If we get to three-quarters or a full percent, then I think there’ll be a flood,” he said. “Things will be rocking and rolling at that time.”
Time To Buy Is Probably Now
That drop could be coming.
The rate-setting committee for the Federal Reserve indicated borrowing costs are expected to drop at least another half percentage point by the end of this year, and another full point next year.
The rate cut signals a major shift for the Federal Reserve, from a single-minded focus on inflation to protection of jobs.
The labor market has been slowing, with unemployment rates inching upward to 4.2%. Continued high interest rates would be a continued drag on jobs.
Lowering benchmark interest rates affects more than just home loans. It will make financing for a variety of things cheaper — from cars loans to credit card balances.
That, in turn, can help move the needle for labor markets by boosting consumer demand.
Coming as it did less than seven weeks before a presidential election, Powell faced questions about whether the rate cut was meant to sway voters.
“Our job is to support the economy on behalf of the American people,” Powell told reporters with various national media outlets. “And if we get it right, this will benefit the American people very significantly. So, we don’t put up any other filters. If you start doing that, I don’t know where you stop.”
Or Is It Still Time To Wait?
Valdez and Reeder both expect most Wyoming real estate buyers to continue waiting for even lower interest rates. However, they could be missing out on what Reeder expects will be a real sweet spot for prepared buyers right now.
“I’ve had some amazing pre-quals leading up to this,” she said.
One of those was a USDA loan at 4.9%, a great rate that surprised — and pleased — everyone, including her clients.
“We’ve all been in this kind of stuck pattern,” she said. “And a lot of sellers haven’t figured out yet that rates are dropping. I think home prices will probably stay where they are for a while, until everyone figures this out.”
After that, prices could start to rise again, particularly if an already short market meets high buyer demand.
“I always say the best time to buy real estate was five years ago, and second best is right now,” Valdez said. “The absolute worst time to buy real estate is a year from now.”
That’s because as time goes by, real estate prices are a bit like the stock market. The overall trend is to keep rising, even if there could be some up and down moments along the way.
“If you wait for interest rates to come down, then prices go up, you could be paying 5, 8, 10% more than you would have if you’d made a decision previously,” he said. “It’s really tough to time the market as far as that goes.”
A higher interest rate can always be refinanced later when rates drop, Valdez added, while a steal of a price for a home can be more fleeting.
But there is one caveat to that. Some sellers have been handcuffed to their existing homes by the high interest rates because they can’t afford to replace the homes they’re wanting to sell.
If there’s enough pent-up demand to sell, that could help goose supply and keep the sweet spot open a little longer.
Renée Jean can be reached at renee@cowboystatedaily.com.
