‘Buyers have been on the sidelines’: Expected interest cut could spark activity in local real estate

WATERTOWN, Mass. — Next week the Federal Reserve Bank is expected to make a highly anticipated cut to interest rates.

This would bring down mortgage rates and make home buying cheaper.

High rates have frozen the market to a large degree because of affordability issues and low inventory levels.

Many homeowners have incredibly low mortgages in the neighborhood of 3% which has kept them from moving up.

David Jordan is one of them.

“We were locked in so low in Watertown, buying in 2021. I was pretty hesitant at first to really give that up, but at the same time, just the realities of life come in.”

Now his growing family will be moving to a larger house in Newton.

“We have two young daughters. The first one was born when we first moved into Watertown. It’s just a three-bedroom condo.”

He originally wanted to wait until rates went down, but felt this property was ideal.

Rates will still be on Jordan’s mind as he hopes he’ll be able to refinance in the coming months.

Mortgage rates soared has high as 8% last year which had a chilling affect on the real estate market.

“You have so many home buyers who are priced out of the market right now in Greater Boston because the prices are so high, and with a high interest rate those mortgage payments are just not attainable,” said Marie Presti of the Presti Group which has offices in Newton and Stoneham.

She thinks the Federal Reserve’s expected rate cut will make a real difference because it will unleash pent-up demand among buyers and more sellers will list their homes.

“I can tell you from my client base, I probably have 10-15 of those homeowners who have been waiting for an interest rate drop so they could make a move.”

Presti stresses inventory is still low, so a buyer’s market isn’t on the horizon.

“I always say marry the house, get the house you want,” explained Presti. “Date the rate now and if the rate ends up dropping more after you buy it, then you refinance”

Expectations about what is a reasonable rate are starting to shift according to Brian Mahoney, Senior Vice President and Director of Sales at The Salem Five Mortgage Company. “People are starting to reconsider what a quote unquote good rate is.”

He crunched some numbers for Boston 25 News to show just much a homebuyers pay on a $500,000 30 year fixed mortgage.

In 2022, the rate was 3% which resulted in a monthly payment of $2,108.00.

Last year, rates had jumped to a peak of 8.125% which meant a monthly outlay of $3,712.00.

Currently, the rate is about 6.375% which sets a homeowner back $3.119.00 every month.

If the rate slides down to 5.75%. the payment would go down to $2,918.00.

“I think a lot of it is psychological,” said Mahony. “I think a good rate, quote-unquote, might just be something that starts with a five. . . and I think it continues to whet the appetite of buyers who’ve been on the sidelines and may very well re-enter the market.”

Mahoney thinks the market has already adjusted for a quarter point cut. He’ll be watching to see if it’s more and how the local reacts to a downward trend.

“I think the future will be a slow ride, but a slow ride down. I don’t think that we’re going off a cliff when it comes to rates.”

Presti expects an initial uptick in home prices because lower rates will bring more sellers out and increase demand.

But unlike the big leap in prices during the pandemic, she thinks more owners will want to sell this time around and that additional inventory will moderate prices.

This is a developing story. Check back for updates as more information becomes available.

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