Mortgage rates ticked higher this week, however, they have been trending downward over the last year.
William Raveis Mortgage regional vice president Melissa Cohn joins Wealth! to give insight into the downtrend of mortgage rates and what investors and home buyers should keep in mind moving forward.
Cohn elaborates on what it will take to get people back to the housing market in droves: “If we want to see the floodgates open, I would say that the rate has to go down to 5.5%. But the fact that we’re down to 6.5% or just below that, or if you think about it, we were not too long ago hovering in the mid-sevens. I think that every quarter percent cut in interest rates will sort of bring that next level or next group of buyers back into the marketplace.”
Commenting on Vice President Kamla Harris’s recent proposal to help first-time home buyers, Cohn says: “I think it’s a wonderful thing that any grant programs that people can get in order to help them with down payments or with closing costs and especially with the new NAR [National Association of Realtors] ruling, if they potentially would have to pay the buyer’s brokers commissions as well, whatever we can do in order to get people into homes is the right thing to do.”
For more expert insight and the latest market action, click here to watch this full episode of Wealth!
This post was written by Nicholas Jacobino
Video transcript
Mortgage rates ticked higher this week, but they are still below 6.5% according to Freddie Mac, rates have been on this downward trajectory for a little over a month now.
So what does this mean for the housing market?
Joining me now, we’ve got Melissa Cohen, who is the regional vice president over at William Rave’s mortgage.
Always a pleasure to get a check in with you, Melissa.
We’ve had some of these conversations over the course of the summer and we’ve continued to see some slippage in the mortgage rate that a good thing for some potential buyers who are waiting to come off the sidelines here.
But what do you think that level needs to get down to, to really see people come off the bench in droves?
I mean, if we want to see, you know, the floodgates open, I would say that the rate has to go down to 5.5%.
But the fact that we’re down to 6.5% or just below that when, if you think about it, we were not too long ago covering in the mid sevens.
Um I think that every quarter percent cut in interest rates will sort of bring that next level or next group of buyers back into the marketplace.
And also so as rates drop, we will see sellers who’ve been locked into their low interest rates, you know, consider selling their property and getting back into the market as well.
And that would help us because we really do need more inventory.
What is the key thing that potential home buyers should be listening for in the next FO MC meeting?
And even as we’re set to get the minutes that come out from the previous meeting, I think it’s going to be, you know, their tone.
Are they making this rate cut because of the July Jobs Report or, you know, do they continue to start a cycle of rate cuts and that will be ongoing for a period of time?
Now, we’ve seen economic data that has clearly supported the fact that the rate of inflation is absolutely moderating down towards the fed’s 2% goal.
But we’ve also seen we have that really weak Jobs report, but we also had a really strong retail sales report yesterday.
So, you know, it’s really gonna be, you know, what is the strength of the economy and how far does the Fed have to go and how does the bond market react to it?
Because it’s really not about what the Fed does.
It’s how the bond market reacts to it.
Mortgage rates are tied to the 10 year treasury, they’re not tied directly to the fed funds rate.
What happens if you see people both coming off the sidelines and then refinancing at the same time, what, what does that do to the broader housing market?
Uh If there is any kind of net impact that could be anticipated?
Well, I mean, obviously if people are refinancing, that means that they’re not selling and that’s not going to be adding to the inventory.
I mean, rates are down and I think there’s been a tremendous amount of pent up demand for people who have wanted to refinance either to consolidate a higher rate home equity loan to pay off credit card debt for home improvement.
Um So, you know, there are more people coming back into the refinancing marketplace, but you know, there are also a lot of people that will find that, you know, when rates are lower that the, you know, modifying the mortgage is not going to give them the home that they want and that they will in the end end up trying to sell and, you know, moving on and adding more inventory to us.
And as we were just discussing with our own housing economy and the housing market reporter Danny Romero of the uh credit that the Harris uh Harris Walls campaign is looking to discuss later on today.
Um if they take office and if they are able to kind of move that through Congress, what would that credit do for first time home buyers from your assessment?
Oh, I think it’s a wonderful thing that any grant programs that people can get in order to help them, you know, with down payments or with closing costs, you know, and especially with the new N A ruling, if they potentially would have to pay the buyers, brokers commissions as well, you know, whatever we can do in order to get people into homes is the right thing to do.
And I think it’s a wonderful idea, Melissa Cohen, who is the William Ravis Mortgage Regional Vice President, Melissa.
Great to check in with you.
Thanks so much.
Appreciate it.
