Real Estate Market Begins to Thaw: What’s Driving the Change?

Mortgage interest rates, which reached an 8% high in October 2023, have recently begun to decline. As of last month, rates fell to 6.1%, coinciding with Federal Reserve Chairman Jerome Powell’s announcement regarding the potential for interest rate cuts. This trend suggests that mortgage rates may continue their downward trajectory.

The average mortgage payment for a home valued at $380,000 in Maricopa has seen a substantial decrease of $485 per month over the past year. These lower rates are already influencing the local real estate market, resulting in increased activity. However, questions linger about whether this uptick will lead to rising prices similar to those witnessed during the pandemic.

While a resurgence in market activity is expected, significant price growth remains unlikely. Unlike the pandemic period, when low rates exacerbated housing shortages due to supply chain disruptions and worker shortages, the current market landscape is markedly different. For instance, Maricopa had only 29 homes available at one point during the pandemic, whereas there are now over 500 active listings on the MLS.

A monthly payment reduction of $485 is notable, yet it’s still insufficient given that interest rates once sat between 2% and 3%. To further entice buyers and sellers, rates will need to decrease more significantly. Insights from a recent Inman Intel and Dig Insights survey involving 3,000 working-class adults reveal that two-thirds have no intention of purchasing a home within the next year. However, should rates drop to 5.5%, one-tenth might reconsider; a dip to 5% would boost that number to one in five.

This indicates a complex challenge for both buyers and sellers. Buyers desire lower payments, while sellers are reluctant to abandon their advantageous 2% to 3% mortgage rates. Nevertheless, with the current 6% rates, a greater number of buyers and sellers may explore re-entering the market, though this shift may not significantly affect pricing.

In conclusion, while increased market activity is anticipated in the upcoming months, home prices are expected to stabilize rather than fluctuate dramatically.

Dayv Morgan is a Maricopa Realtor and owner of HomeSmart Premier.