The fact that scores of borrowers bought or refinanced their homes during the record-low-rate environment of the COVID-19 pandemic means many have been reluctant to consider a move because it would mean having to take out a much more expensive mortgage than their current arrangement.
But even though rates almost certainly won’t return to the historic lows of the pandemic era, a steady further drop could prove sufficient to persuade homeowners to step back into the market and list their own homes, according to a Pennsylvania-based mortgage broker.
Paul Carson (pictured top), of Philadelphia Mortgage Brokers, told Mortgage Professional America in July that even when rates were hovering around the 7% mark, activity had remained robust – but a continued drop would probably signal even stronger movement among buyers and owners. “I think personally the magic number [would be] if we could see 5.5% to 6%,” he said.
“Everybody can [say], ‘Alright, I can live with a five if I have to say goodbye to a two or three or four. I can deal with a five,’ but six, seven and eight really hurt – especially for well-qualified primary residence people when we really hit the peak of about 8% for those folks.”
Bank of America has updated its economic forecast, signaling a reduced likelihood of a US recession. CEO Brian Moynihan attributes this shift to steady consumer spending, which, although moderated, remains resilient.
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— Mortgage Professional America Magazine (@MPAMagazineUS) August 13, 2024
Homeowners likely to feel better about making a move
The rapid rise in interest rates in 2022 and 2023 helped pour cold water over a previously red-hot US housing market and forced many prospective buyers to the sidelines, their budgets squeezed by mounting affordability challenges and higher borrowing costs.
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