The Federal Reserve cut interest rates for the first time in four years on Wednesday, with an unexpectedly significant reduction of 0.5 percent.
The long-awaited cut perked up homebuyers across the nation, especially in growing areas like Clark County. Lower mortgage rates, however, may cause home prices to accelerate in response to unleashed pent-up demand.
“Everybody’s going to be competing for the same houses, and we’re going to be back to 10 offers for every house and bidding wars,” said Josh Fuhrer, a real estate investor and developer.
When will the cut affect housing markets?
Mortgage rates aren’t directly tied to the federal funds rate. Local lenders and real estate experts say it’ll take months for mortgage rates to fall more significantly than they already have in the weeks before the cut.
Mortgage lenders, for the most part, have already adjusted their rates in preparation for this week’s rate cut. (The cut was higher than expected, so they may continue to drop slightly in the coming weeks.)
Just four months ago, mortgage rates hovered above 7 percent for a 30-year fixed mortgage loan, according to Freddie Mac. On Thursday, they were a hair over 6 percent.
However, most economists predict several more rate cuts. Experts at J.P. Morgan predict there will be two additional rate cuts in 2024 and expect the cuts to continue into 2025.
“This particular (cut) is priced in,” said Heather McGarry, a mortgage adviser with Knight Financial Home Loans. “The next several, not as much.”
It’s true that mortgage rates are going to go down, and prices are going to go up because of those cuts, Fuhrer said, but there’s a lag. Although mortgage rates have come down these last few weeks, home prices haven’t accelerated yet in response.
“My advice to homebuyers would be: This is the time to be buying — right now,” Fuhrer said. “Buy the house now, and refi(nance) it in the spring or summer when there are more rate cuts. That’s my plan.”
Fuhrer just bought a home last month to lock in a price before the jump, which could happen within weeks or months. (The housing market usually slows in winter.)
The median Clark County home price in August was $535,000, a 1.9 percent increase from this time last year, according to last month’s Regional Multiple Listing Service report.
McGarry recommends looking into refinancing now, even if it turns out the best option is to wait a year, because the right time to refinance depends on each homeowner’s circumstances.
“I think it’s always a good idea to kind of get your ducks in a row because we know refinancing is not a sure thing,” she said.
How about inventory?
Although inventory has climbed since a major dip in 2022 and 2021, demand will outpace supply, experts say.
In 2024, Clark County has had about 9 percent more listings than it did this time last year, according to the RMLS report. However, the number of closed sales has not increased at the same rate. That figure is only about 2.8 percent more than last year.
Eventually, the interest rate cuts might lead to more construction, because high interest rates have hindered home construction. But construction projects take time.
“I don’t think you’re going to see an immediate change in inventory that’s going to impact the actions of buyers over the next four to six months, or even over the next year,” Fuhrer said.
