SACRAMENTO, Calif. — The Federal Reserve lowered interest rates for the first time in months in September 2024 after reaching record highs last year.
It’s left many people wondering what it means for their home or their ability to afford one.
ABC10 spoke with a local real estate expert on how the interest rate change impacts the Sacramento area’s housing market.
Kevin Oto, a Sacramento-based broker and owner of Green Haven Capital, says the 0.5% decrease has a lot of his clients asking how it will change mortgage rates. He says the rate only explains part of the story.
“When the Fed changes the federal fund rate, that doesn’t mean mortgage rates are going to fall at the same time,” Oto said.
Long-term, fixed-rate mortgages are currently 6.4%.
“We actually saw rates fall ahead of the rate drop, so rates were coming down even before the Fed announcement,” Oto said. “And funny enough, even after the Fed announcement, we saw interest rates actually go up.”
Mortgage lender Freddie Mac says rates are more than 1% lower compared to a year ago. It’s good news for potential homebuyers, especially if they shop around for the best quote. It’s best to do that since rates can vary widely between mortgage lenders.
“In Sacramento, we still have a relatively strong market. We’ve seen inventory tick up a little bit, but overall we still have historically low inventory,” Oto said.
Lower mortgage rates are expected to spark more buyers into entering the market, but with that comes more competition and potentially higher prices.
“Buyers are very cautious when it comes to affordability, the price that they’re paying. I feel like sellers can’t really get top dollar unless they’re adding value, unless they’re providing a competitively priced home or if they have a unique property that people want,” Oto said.
He warns don’t focus on timing the market. Instead, focus on the payment you can afford and a home that suits your budget and fits your needs.
“If rates drop, you have a chance to refinance later, but timing the market is ultimately impossible and you could really miss out on a golden opportunity,” Oto said.
Experts say lower mortgage rates can bring down a homebuyer’s monthly mortgage payment. Keep in mind high home prices are keeping a lot of people from buying homes.
One report by NPR says overall home prices in the U.S. have risen about 50% since early 2020.
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