Housing market predictions are a hot topic these days, especially with the recent dip in mortgage rates. For years, sky-high rates have kept the market relatively stagnant. Homeowners, comfortable with their lower rates, hesitated to sell and take on pricier mortgages. But with rates finally easing, could this signal a thaw in the freeze?
Housing Market Predictions: Where Will Lower Mortgage Rates Make the Biggest Splash?
Key Takeaways:
- Falling mortgage rates are expected to stimulate the housing market.
- Cities with a high percentage of mortgages above 6.5% are predicted to see the most activity.
- Naples, Florida leads the pack with the highest share of potentially “unlocked” mortgages.
- Realtor.com predicts that mortgage rates will drop to 6.3% by the year's end.
Unlocking the Market, One City at a Time
A new analysis by Realtor.com suggests that certain metro areas are poised to experience a surge in seller and refinance activity thanks to the decreasing mortgage rates. These areas share a common trait: a significant portion of recent home sales occurred when rates were above 6.5%. As rates now dip below this threshold, homeowners in these regions are finding themselves “unlocked” – able to refinance or sell and buy anew at more favorable rates.
Topping the list is Naples, Florida. Here, a whopping 15.2% of mortgages are estimated to be above the 6.5% mark, a stark contrast to the national average of 5.3%. This suggests a large pool of homeowners who might be enticed by the prospect of lower monthly payments or a profitable sale.
But it's not just sunny Florida feeling the heat. St. Louis, Missouri, comes in a close second with 13.9% of owner-occupied homes now potentially “unlocked.” Interestingly, the top 10 cities span the US map and encompass a range of affordability levels. From Miami and Cape Coral, Florida, to Fort Wayne, Indiana, Albuquerque, New Mexico, and even New Haven, Connecticut, the impact of falling mortgage rates is far-reaching.
The Domino Effect of Lower Rates
Realtor.com's economic research team forecasts that mortgage rates will continue their descent, settling around 6.3% by the close of 2023. This projection hinges on the Federal Reserve's anticipated cuts to its benchmark rate. If this prediction holds true, the cities highlighted in the analysis could be among the first to reap the benefits.
Assuming rates maintain this downward trajectory, the allure of selling or refinancing will likely grow stronger for many homeowners in these markets,” says Hannah Jones, Senior Data Analyst at Realtor.com. Homeowners who once felt trapped by high mortgage rates might be increasingly motivated to sell as rates become more attractive.
However, Jones also cautions that for recent buyers, the immediate gains from selling might not be substantial enough. Refinancing, at least in the short term, might be the more appealing option.
What Makes These Cities Unique?
The cities pinpointed by Realtor.com share a defining characteristic: an unusually large proportion of homes purchased recently when average mortgage rates were north of 6.5%. This trend is often linked to factors like robust population growth and soaring home prices.
For instance, cities like Naples, Cape Coral, Fort Myers, and Myrtle Beach have witnessed significant population influxes. This surge in demand has fueled dramatic price increases. Realtor.com data reveals a staggering 69% surge in Naples home prices from 2020 to 2023.
However, there are encouraging signs that these markets are gravitating towards a more balanced equilibrium between buyers and sellers. This shift is expected to gain further momentum as mortgage rates continue to fall.
“July saw year-over-year inventory growth in each of these cities, potentially contributing to recent sales despite the persistently high mortgage rates,” explains Jones. “This suggests that even in today's market, buyers in these areas benefit from a wide array of choices and the advantage of falling rates.”
Methodology:
To pinpoint the cities with the highest concentration of potentially “unlocked” mortgages, Realtor.com employed a multi-faceted approach. Using data from deed records and Optimal Blue, they analyzed home sales in each metro area since 2020, focusing on periods when local mortgage rates averaged above 6.5%.
These transactions were then measured against the total number of owner-occupied housing units in each metro area (data sourced from the U.S. Census Bureau). This provided an estimate of the proportion of local mortgages exceeding the 6.5% threshold.
The Top 10 “Unlocked” Housin:
Here's a closer look at the top 10 cities and their respective “unlocked” mortgage shares and median listing prices as of July:
- Naples, FL: 15.2% (Median list price: $770,000)
- St. Louis, MO: 13.9% (Median list price: $313,900)
- Myrtle Beach, SC: 13.4% (Median list price: $339,900)
- Cape Coral, FL: 12.4% (Median list price: $449,950)
- Miami, FL: 11.7% (Median list price: $535,000)
- Albuquerque, NM: 11.6% (Median list price: $419,000)
- Kansas City, MO: 11% (Median list price: $410,000)
- Fort Wayne, IN: 10.5% (Median list price: $319,900)
- Oklahoma City, OK: 10.4% (Median list price: $325,903)
- New Haven, CT: 10.3% (Median list price: $424,925)
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