Finally! Mortgage rates have fallen to 11-month lows in anticipation of Fed rate cuts this week. And that’s not the only good news: Listing prices also fell for the first time since spring, declining by 0.9% year over year for the week ending September 6, according to Realtor.com.
This potent combo of falling mortgage rates and home prices could mean significant savings for aspiring homeowners, particularly in markets with more pronounced price drops. In Los Angeles, for instance, asking prices have plunged by 7.6%, the steepest drop among the top 50 US metros.
After this summer’s historically sluggish housing market, homebuyers and real estate investors alike are crashing open houses like it’s spring 2021.
Buy now or wait?
“I’m absolutely going to capitalize on this dip and reduced rates,” says Ben Mizes of Clever Real Estate. “Last week, I made an offer on a duplex in St. Louis when the seller dropped $25k from their asking price after 40+ days on the MLS. I’m hoping to add three to four doors by the end of the year.”
“This feels like the beginning of the end of a roller coaster that’s kept investors hesitant for months,” agrees Robert Rahmanian, a real estate investor and cofounder of brokerage REAL New York. “There’s a lot of capital sitting on the sidelines, just waiting for the right moment, and this rate drop is starting to unlock some of that.”
There’s just one potential problem for a housing market desperate for a jolt of activity: If rates and prices are expected to continue dropping, investors might hesitate to scoop up properties now.
“The Fed only cuts rates when the economy is cooling. If a recession hits, rents could drop and today’s bargains could sour,” warns Chad Cummings, CPA, of Cummings & Cummings Law. “If rents fall or vacancies rise, today’s ‘bargain’ could bleed cash by spring.”
To guarantee a deal he won’t regret, Mizes says he rate-shops aggressively and homes in on tired listings (those 30–60 days old). “I’m winning where there’s blood, locking in income-generating units in B-class neighborhoods with consistent rental demand.”
Below is a list of US cities with the biggest price drops, and here’s how to predict where home prices may fall next.
Illustration: Morning Brew Design, Data: Realtor.com
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