‘Everything on pause’: Interest rate cut can’t spark housing market burdened by uncertainty

This was not the year that Frank D Angelo expected it to be I thought that was going to be a very robust year for home sales D Angelo president of Minneapolis Area Realtors explained But clearly the political uncertainty the cabinet shutdown the tariff talks prior to all of that just put everything on pause Pause pause pause Nationally home sales are on track for their worst year in decades The state has bucked this trend with evidence from Minnesota Realtors showing that the number of year-to-date closed sales by the end of August was higher than at the same point in The median sale price was also higher a positive records point for sellers but not for buyers The Federal Reserve s newest interest rate cut has sparked curiosity from anticipated homebuyers according to builders and real estate agents but not enough to overcome an exceptionally uncertain economic atmosphere We ve seen that renewed interest overall as the rates have kind of drifted a little bit lower D Angelo explained But buyer behavior isn t inevitably about the math associated with affordability function use strict window addEventListener message function a if void a material datawrapper-height var e document querySelectorAll iframe for var t in a information datawrapper-height for var r i r e i i if r contentWindow a source var d a material datawrapper-height t px r style height d Consumer confidence plays a very big role he commented adding that there has been a steady drumbeat of news about governing body layoffs pact wars partisan gridlock the politicization of economic material and other events that hurt consumers confidence in the financial sector Look at the greater part latest events We just had a establishment shutdown this past Wednesday and that uncertainty keeps people on the sidelines Related Contract for deed buyers beware Consumer confidence slid in September to the lowest level since April of this year according to a widely followed measure of consumer sentiment The Conference Board warned in its Sept record that U S consumer attitudes have been below the threshold that typically signals a recession since February Minnesota real estate agents and home builders say despite this economic pessimism the housing arena continues to show various healthy fundamentals The housing sector and interest rates are closely linked The Fed funds rate that is decided at the widely covered Fed Open Field Committee meetings is the interest rate at which commercial banks lend their excess reserves to each other overnight When that rate is cut it allows commercial banks to borrow money more cheaply because they will pay less interest on the borrowed capital That gives banks the option to loan money to consumers at a lower interest rate including for mortgages This can boost the buying power of possible homebuyers who can then afford to borrow more while making the same monthly payments that they would on a smaller loan in a higher interest rate setting While mortgage rates rely on other factors such as the bond region they tend to follow the Fed s benchmark interest rate Mortgage rates generally go up when the Fed tightens monetary protocol and go down when the Fed loosens monetary guidelines The Federal Reserve lowered its benchmark rate in September but it had telegraphed the move months earlier In this instance the Fed saying it was going to cut rates caused mortgage rates to begin dropping long before the actual benchmark rate cut in September function use strict window addEventListener message function a if void a content datawrapper-height var e document querySelectorAll iframe for var t in a records datawrapper-height for var r i r e i i if r contentWindow a source var d a records datawrapper-height t px r style height d What we are experiencing here in the Twin Cities and surrounding area is that inventory is relatively low and the arena feels healthy on both sides revealed real estate agent Greta Fay While generally upbeat on the territory she acknowledges that the Fed interest rate is not as significant a factor as a feasible buyer s financial situation and unique requirements Homebuying is above all an incredibly personal decision Fay noted Meanwhile broader political and economic trends are definitely impacting specific consumers Nick Erickson senior director for housing framework at building industry group Housing First Minnesota sees this as a expected inflection point for the field The number of building permits for single-family homes in Minnesota increased this year after three years of declines September saw a year-over-year increase in permits applied for he revealed That housing supply advance was driven in part by demand as well as anticipation of Fed interest rate cuts A person walks past the Federal Reserve Bank of Minneapolis on Friday Oct in downtown Minneapolis Minn Credit Ellen Schmidt MinnPost CatchLight Local Summary for America Late April or early May is when the area really started to react to an expected rate cut Erickson noted A few of those permits could be just coincidental timing but the expectation of a rate cut definitely was a factor The state s housing deficit was around homes Erickson declared Home builders want to be ready to sell as the state s population grows even without buyers lined up in advance he noted Economic slowdowns can reverberate for years in the housing area When builders suspended new construction during the Great Recession in it took half a decade for activity to recover The resulting shortage which occurred nationwide led to higher home costs that priced large swaths of Americans out of the housing field We re nearing years since the Great Recession and we re still dealing with the housing shortage that the recession created Erickson announced Related Will the antitrust settlement change real estate Minnesota s would-be buyers have been hard-hit by the housing affordability problem The Twin Cities metro area has the most of expensive median home price in the upper Midwest even greater than Chicago a larger and traditionally more expensive metro area Erickson commented According to Zillow research the median home price in the Twin Cities was in June higher than the national average of and nearly more than the Chicago metro s median home price of in June Those the majority impacted by higher prices and interest rates are first-time buyers who have less savings and rely heavily on financing D Angelo reported Their hesitation to make large financial commitments in uncertain times in turn keeps current homeowners who are ready to upsize downsize or move locations in a holding pattern he mentioned since there are fewer buyers willing and able to purchase their homes Younger promising homebuyers are also likely to hold off if they aren t confident in the economic system D Angelo declared Until we can make homes affordable for first-time buyers and put the market system on a predictable stable upward trajectory for a while there will remain bottlenecks in the system D Angelo reported All four real estate agents that spoke to MinnPost stated for those who need to move and can make the finances work it s a good idea not to overthink the broader business activity move when you re ready to not when you think the territory is perfect for it Don t wait on headlines or try to time the Fed Every realm creates opportunities announced D Angelo So sit down with a trusted realty advisor who can help you cut through all that noise make particular sense of the evidence and help you make the best decision to protect your equity in the current era or position yourself correctly for in the next 24 hours The post Everything on pause Interest rate cut can t spark housing territory burdened by uncertainty appeared first on MinnPost