Rate Cut to Boost Homebuyer Moods

HOUSTON – (By Dale King, Realty News Report) — As late summer temperatures soared during August, Houston’s single-family housing market chilled out. But with a Federal Reserve and other positive signs in Autumn 2024,the housing market has plenty of positive vibes.

“The slower pace of sales enabled inventory to expand and prices to moderate, creating a positive landscape for home buyers,” says the Houston Association of Realtors’ August 2024 Market Update.

HAR Chair Thomas Mouton with Century 21 Exclusive Properties said more renters could interested in homeownership after the Federal Reserve cut the interest rate by half a percentage point last week. He expressed optimism about the Fed’s historic interest rate cut, its first downward movement since the days of the pandemic.

Residential construction continues in the Houston area. Photo by Ralph Bivins, Realty News Report. Copyright 2024.

Mouton admitted Houston’s home sales situation took a slide in August, [but it] “is still in good shape. Expanding inventory and easing mortgage rates are offering buyers more opportunities.” He noted that the Federal Reserve’s interest rate reduction “could further boost consumer confidence and home sales.”

Actually, potential home purchasers around the nation have been contemplating the potential effects of the interest rate reduction now that the Fed decision is on the record. Immediate mortgage movement was limited, though the stock market did soar after receiving news of the Fed’s action.

A research report by Institutional Property Advisors observes that the “decision reflects the Fed’s confidence that inflation is moving sustainably toward 2 percent” as well as “its intent to prevent further labor market softness.”

“With two meetings remaining in 2024, the Fed could lower interest rates further, which would aid investor demand for commercial real estate,” IPA said.

Commenting on the rate cut, National Association of Realtors Chief Economist Lawrence Yun cited what he sees as a major positive impact on the real estate market. “Due to already low mortgage rates compared to spring, the purchasing power for home buyers has been lifted by around $50,000 for those with a $2,000 monthly mortgage payment budget. Consumers who were priced out due to earlier higher mortgage rates could now be back in the market.”

“The Fed’s rate decrease is the beginning of six to eight rounds of further rate cuts well into 2025,” Yun added. “Mortgage rates have already anticipated the Fed’s likely path. That is why the 30-year rate has fallen by 150 basis points from early in the year to today. Any further decline in mortgage rates will be minimal.”

Mortgage Bankers Association (MBA) President and CEO Bob Broeksmit offered the following assessment of the rate situation:

“The continued decline in mortgage rates is giving the mortgage market a much-needed boost. Applications have now increased for four consecutive weeks and six of the last seven. MBA expects mortgage rates to continue their slow decline, helped in part by the Federal Reserve cutting short-term rates for the first time in four years, with the likelihood of additional cuts to come at its upcoming meetings in November and December.”

News of the Federal Reserve’s rate cut arrived in Houston just as the HAR issued its home sales and leasing reports for August.

The association said lease listings in Houston rose 9.1 percent to 4,462 single-family home rentals compared to 4,089 during the same time last year, said the rental analysis for August. The average lease price climbed 2.2 percent to $2,397.

New leasable property listings were 11.6 percent above where they were last August with 6,184 single-family rental properties added to the Multiple Listing Service (MLS). Days on market, or the actual time it took to lease a home, expanded to 32 days from 28 days last year.

While the leasing market continued to show its muscle, single-family home sales across Greater Houston declined 8.3 percent year-over-year. The HAR Multiple Listing Service recorded sales of single-family home sales were down 8.3 percent year-over-year with a total of 7,340 homes sold across metro Houston compared to 8,006 last August.

The upscale segment ($1 million+), which represents 4.1 percent of all home sales in August, had the strongest performance, with a 2.0 percent increase in sales.

From another segment of the housing arena, the townhome/condominium rental market experienced steady demand in August. Leases of those properties rose 1.7 percent year-over-year to 721 units compared to 709 last year. The average lease price edged up by 0.6 percent to $1,979.

The HAR’s analysis also says the city’s rental market in August “continued to show strong and consistent demand, proving to be a bright spot in the overall housing market.”

“The rental arena has remained steadfast while other sectors of Houston’s housing market have experienced fluctuations,” said HAR’s Mouton.

Mortgage rates have been declining as summer ends. Last week Freddie Mac reported the average 30-year mortgage was 6.09 percent, down from 7.19 percent a year ago.

“Mortgage rates continued declining towards the six percent mark, reviving purchase and refinance demand for many consumers,” said Sam Khater, Freddie Mac’s Chief Economist. “While mortgage rates do not directly follow moves by the Federal Reserve, this first cut in over four years will have an impact on the housing market. Declining mortgage rates over the last several weeks indicate this cut was mostly baked in, but we expect rates to fall further, sparking more housing activity.”

Mark Your Calendar

Downtown Houston + will present its State of Downtown Annual Meeting on Oct. 16 at 11 a.m. to 1:30 p.m. at the Hilton Americas, Downtown 1600 Lamar St. Keynote speaker: General Stan McChrystal. Information:

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