What does the recent interest rate cut mean for the Spokane housing market?

Whether or not you have been interested in buying or selling a home over the last few years, you have undoubtedly still had plenty of conversations about the economy, and more specifically, interest rates. We all have some vested interest in these rates.

Earlier today, the Federal Reserve cut the "fed funds" rate by half a percent (50 basis points), a which will (and already has) lead to lower interest rates on mortgages.

So what does that mean for the Spokane real estate market? 

1. For Buyers: Affordability
   There is a rule called the "1%-10%" rule, which says that for every 1% the interest rate drops, the price of home you can afford is increased 10% while maintaining the same payment. Rates haven't come down a full percent just yet, but as they drop, more buyers who were potentially priced out will begin to enter the market, and buyers who were at the top of their budget before will start to feel more comfortable with the current prices.
   

2. For Homeowners: Golden Handcuffs Start to Loosen
   Sellers who locked in a rate when they purchased or refinanced when rates were at historic lows (during the pandemic) won't feel as trapped by their rate as taking a new loan won't sting quite as bad. Now, with equity built up as home prices have appreciated and sellers potentially ready for their next home, these lower rates will begin to look more attractive. 
   

3. For everyone: Taking Inventory 
   Relatedly, sellers who haven't wanted to take on a higher interest rate by moving have, by default, not been selling their homes. Nationally, inventory (the # of homes for sale) was already low, which was even more pronounced in Spokane. As homeowners take advantage of this opportunity to transition into their next home, it could mean more homes come on the market. 
   

4. Everything's a Competition
   All this said, as rates lower, even if inventory goes up, so does the number of buyers looking. Sellers become buyers, buyers who were waiting become active, and buyers who have already been looking are still looking. A rising (or lowering in this case) tide lifts all boats, but we will also see more boats floating into the bay. 

TL;DR (Too Long; Didn't Read)

Interest rates are coming down, which will mean more active buyers and sellers, meaning more competition, but also savings compared to where rates have been. 

If you have questions about how these changes may affect your current goals for home ownership or selling your home, please don't hesitate to email or call us! We would be happy to help you navigate the market or answer questions to help you make the most wise and informed decision!