On Wednesday, the Federal Reserve cut interest rates by half a percentage point.
Implications ripple across the economy. One of the most significant areas is real estate.
In Westport, that’s always a lively topic. “06880” asked our friends at KMS Team at Compass what the news means for home buyers. They say:
According to to Lawrence Yun, National Association of Reatlors chief economist, much of the rate cut had already been factored into existing mortgage rates.
However, he said, “due to already low mortgage rates compared to spring, the purchasing power for home buyers has been lifted by around $50,000 for those with a $2,000 monthly mortgage payment budget. Consumers who were priced out due to earlier higher mortgage rates could now be back in the market.”
For those buyers still in the looking phase, this offers an opportunity to reach just beyond their target range, perhaps opening up a new selection of homes to consider.
Let’s say buyers set a price range between $1 million and $1,149 million. Today, that search in Fairfield County shows 35 properties.
Simply changing the upper end of the range to $1.2 million brings 62 homes to consider.
In Westport, a search range of $1.5 million to $1.649 million returns just 2 homes on the market. Increase the range to $1.7, and now there are 6 homes.
The Federal Reserve’s rate cut puts this 3-bedroom, 2-bathroom, 2,304-square foot home on 1.41 acres at 163 Cross Highway in the range of buyers who might not have afforded it otherwise. It’s listed for $1.699 million.
For buyers who have already identified a property to purchase but have not locked into a mortgage, the potential savings are a bonus.
One client, looking at a 5-year adjustable rate mortgage, received a quarter point reduction in the rate overnight.
While this amounts to less than $100 a month on a $500,000 loan, it is not insignificant. If just half that amount were applied as extra principal payments, the borrower would save more than $24,000 over the life of the 30-year loan — and finish paying the mortgage off 15 months sooner.
The Mortgage Research Center offers a great calculator, for playing with the numbers.
Most importantly, the rate cut is a psychological signal for nervous home buyers that things are looking up.
The idea of “dating the rate and marrying the home” — refinancing when rates drop — is unfamiliar to many first-time home buyers. And why not? This is the first rate cut in over 4 years.
(Real estate is of prime interest for many Westporters. “06880” covers the topic often — along with so much else. If you like our work, please click here to support this hyperlocal blog. Thank you!)
Crickets!!!!
Time to find another house to flip.
That gorgeous home at 163 Cross Highway is the home of the late Don and Jean Masiello. Unfortunately we all know what is going to happen to it.
Another thinly disguised Compass/06880 advertorial.
Keep up the ‘donation’ Compass.
I’m so excited and I just can’t hide it. I’m about to lose control and I think I like it.
I’ll admit I’m not as smart as Eric. However, I think that anyone who bought in Westport in the last two or three years are going to lose money! I know my comment won’t be very popular, but I am pretty sure I’m correct!
My father was good friends with the Masiellos.
Jack, I wouldn’t be as smart as I am if I hadn’t cut class to go bowling.
Eric, You probably had a 210 bowling average! Wait.. or was 210 I.Q?
Right.. 210 was your I.Q. I remember now.
You’re very kind Jack. Not many old Westporters like you left. I haven’t disclosed this previously but cutting class to go bowling was my way of “giving back” to the Backiel family that had contributed so much to Westport youth. Unfortunately, my grades suffered and my scholarship to Brown University was revoked. It wasn’t until much later that I finished college and got my MBA (at Trump University).