As interest rates drop to the lowest they have in the last year, homeowners are refinancing at record high rates, up 35% in just one week. When compared to the same year one week prior, refinancing applications were also up 118%. What does this mean exactly for the real estate market? Well for starters, it means we’re starting to see a shift.
Over the last year, we’ve heard a lot of unsettling concerns about a housing crisis, basically nonstop. Perhaps because tis the season (election season) or some other reason, politicians are finally proposing measures to fix the issue, aside from just lowering interest rates. This being said, there had been expectations of the Fed lowering interest rates in September of 2024, which was accelerated by a higher than expected unemployment rate published in July, along with a downfall in the stock market also related to elevated unemployment.
It seems that between laws proposed by politicians to add housing, and a steady lowering of interest rates, there is some ray of hope for making homeownership possible for more people. It’s still too early to tell the effectiveness of these measures, but here in Massachusetts, politicians have been very vocal about making changes. Senator Warren just proposed a bill allocating millions of dollars towards the building of affordable housing by taxing wealthier Americans, while also restricting private equity companies from buying certain properties, and incentivizing developers to build more via various tax benefits. Governor Healey also just signed a bill restricting local towns/cities from heavily regulating the development of accessory dwelling units, allowing owners of single family homes to create another livable space on their existing property, adding housing.
If you’ve read my previous articles, you’ll know that I’ve often mentioned lowering interest rates alone will not fix our housing issue. This perspective is grounded in the fact that low inventory is already creating a highly competitive environment for home buyers, simply dropping interest rates will qualify more people to bid on those homes, but does not actually add any inventory, creating a more competitive environment for an already scarce supply. That being said, I do think that a drop in rates IN TANDEM with efforts to create more housing inventory will create a more favorable environment for new homebuyers, as it is now for people that have recently bought and are finding it a good time to refinance. Let’s see how this plays out.
Thanks for reading!