There are less than six weeks left until spring starts and what is bound to be an interesting season for homebuyers.. The warmer weather makes for a more comfortable search and, if timed properly, can allow for a during the summer, before kids return to school. That said, this spring will likely be unique for buyers as it is set to bump against .
The Federal Reserve has raised its benchmark interest rate range numerous times in recent years to help tame inflation but with inflation now coming down, that rate could soon be cut,. And when that comes down, will fall, too — right as homebuyers reenter the market. Below, we’ll break down three ways mortgage rate cuts could affect homebuyers this spring season.
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How will mortgage rate cuts affect the spring homebuying season?
Here are three possible ways that a reduction in mortgage rates could affect homebuyers during the warmer months.
Inventory could improve
Many existing homeowners have been reluctant to sell their homes and thus lose their current low interest rate. But if rates are cut those owners may be more willing to put their homes on the market, increasing what has been a pretty lowas of late.
This will be welcome news for buyers who have had less to hunt for in recent years. Considering that inventory traditionally increases in March, April and May anyway, this could combine for a much more robust homebuying season than buyers have encountered in recent years.
With this scenario in mind, buyers should start exploring their mortgage options now and consider gettingso that they’re ready to act when the market opens up.
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Competition could increase
A growing inventory of houses for sale won’t be completely positive, however. More available houses could also lead to increased competition among buyers, potentially complicating the homebuying process.
“We believe the market will be much more competitive this year than it was in 2023 with more multiple offers and fewer concessions from sellers,” Jason Obradovich, the chief investment officer of New American Funding, recently told. “Because of this, cash offer programs will be popular, as buying with cash can give buyers a competitive advantage.”
With the potential for increased competition, prospective buyers should do all they can to boost their profile in advance. This can include, getting pre-approved and planning their budget so that they know exactly what they can and can’t afford.
Prices could change
generally head in one direction: up. That said, some drops inevitably take place and if buyers time their purchases carefully, they may be able to take advantage of them. But if mortgage rate cuts do take place — and inventory does improve — it’s unlikely that home prices will remain where they are currently.
Depending on the market you’re buying in, prices could rise or drop.vary based on multiple factors. Just understand that the home you’re planning on buying today may not be the same price by the summer.
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The bottom line
Homebuyers waiting for some flexibility in the market may be in luck this spring. With the potential for rate cuts high, the real estate market is likely to change soon. This could mean an improvement in inventory but also an adjustment to the number of active buyers. And with rate cuts and an uptick in buyers, home prices may also evolve to a new norm. To prepare for these scenarios buyers should start researching their mortgage rate options now so that they’re ready to act this spring.