According to the San Francisco Chronicle, mortgage rates have been declining from their peaks in the high-7% range last fall, sparking optimism in the housing market after the Federal Reserve's recent rate cut. But will this change impact California’s real estate market?

Some experts believe there’s a “magic number” when it comes to 30-year mortgage rates that could revive the market. Currently, home sales are down 4.2% from a year ago, and last month’s sales were at their lowest since the early pandemic, according to Redfin. However, with mortgage rates now averaging 6.09%, some are hopeful the market will pick up.

The idea of 6% being a turning point is supported by data from Fortune, which notes that many industry professionals consider this rate as a tipping point for increased buyer and seller activity. Historically, 6% is considered a favorable rate compared to the 18% peak in the 1980s and the 7.79% peak seen last fall. However, with 3% rates still fresh in people’s memories and home prices continuing to climb, some wonder if 6% will be enough to reignite interest.

Buyers seem excited about rates dipping closer to 6%, with some already locking in rates as low as 5.875%. However, the bigger challenge is convincing homeowners, many of whom locked in rates below 4%, to list their properties. According to Redfin, six out of seven homeowners in the U.S. currently have a mortgage rate under 6%, which discourages them from selling.

The Bay Area market is also contending with limited housing supply and rising home prices. Even as more buyers return to the market, there simply aren’t enough homes available to meet demand. In addition to mortgage rates and home prices, Bay Area buyers are also increasingly concerned about the rising cost of home insurance, with some seeing premiums surpass $1,000 per month.

Experts aren’t expecting rates to return to 3% anytime soon, unless there’s another major economic downturn. While two more Federal Reserve rate cuts are expected this year, the market is projected to end the year with an average 5.9% mortgage rate. Some believe that 5% is the real “magic number” that could motivate both buyers and sellers to re-enter the market, potentially making a significant difference in California’s persistent housing supply issues.

Bottom Line

Ready to explore your homebuying options or curious about the latest market trends? Contact Stuecher Manning Group today for expert advice and personalized assistance in navigating the Bay Area housing market.

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Source: sfchronicle.com