The housing market predictions are a hot topic these days, especially with the recent dip in mortgage rates. For years, high rates have kept the market relatively stagnant, with homeowners hesitant to sell and take on pricier mortgages. However, with rates finally easing, could this signal a thaw in the freeze?
A new analysis by Realtor.com suggests that certain metro areas are poised to experience a surge in seller and refinance activity thanks to the decreasing mortgage rates. These areas share a common trait: a significant portion of recent home sales occurred when rates were above 6.5%. As rates now dip below this threshold, homeowners in these regions are finding themselves “unlocked” – able to refinance or sell and buy anew at more favorable rates.
Topping the list is Naples, Florida, where a whopping 15.2% of mortgages are estimated to be above the 6.5% mark, a stark contrast to the national average of 5.3%. This suggests a large pool of homeowners who might be enticed by the prospect of lower monthly payments or a profitable sale. St. Louis, Missouri, comes in a close second with 13.9% of owner-occupied homes now potentially “unlocked.”
Realtor.com’s economic research team forecasts that mortgage rates will continue their descent, settling around 6.3% by the close of 2023. This projection hinges on the Federal Reserve’s anticipated cuts to its benchmark rate. If this prediction holds true, the cities highlighted in the analysis could be among the first to reap the benefits.
The cities pinpointed by Realtor.com share a defining characteristic: an unusually large proportion of homes purchased recently when average mortgage rates were north of 6.5%. This trend is often linked to factors like robust population growth and soaring home prices. For instance, cities like Naples, Cape Coral, Fort Myers, and Myrtle Beach have witnessed significant population influxes, fueling dramatic price increases.
There are encouraging signs that these markets are gravitating towards a more balanced equilibrium between buyers and sellers. This shift is expected to gain further momentum as mortgage rates continue to fall. July saw year-over-year inventory growth in each of these cities, potentially contributing to recent sales despite the persistently high mortgage rates.
To pinpoint the cities with the highest concentration of potentially “unlocked” mortgages, Realtor.com employed a multi-faceted approach. Using data from deed records and Optimal Blue, they analyzed home sales in each metro area since 2020, focusing on periods when local mortgage rates averaged above 6.5%. These transactions were then measured against the total number of owner-occupied housing units in each metro area, providing an estimate of the proportion of local mortgages exceeding the 6.5% threshold.
In conclusion, the housing market predictions are looking promising for certain metro areas with a high percentage of mortgages above 6.5%. As mortgage rates continue to fall, homeowners in these regions may find themselves in a prime position to sell or refinance at more favorable rates. The top 10 “unlocked” cities, including Naples, St. Louis, and Myrtle Beach, are expected to see increased activity in the coming months as the market heats up.