Federal Reserve cuts interest rates, but how will it impact Austin?
AUSTIN, Texas - After months of speculation, the Federal Reserve has cut interest rates this week by half a percentage point.
So what will the impact be on Austin's real estate market?
Austin realtor Olivia Vale with Roots Residential Group joins FOX 7 Austin's John Krinjak to discuss in this FOX 7 Focus.
JOHN KRINJAK: So this was kind of a big deal this week, right? First cut in four years. What does that signal just in general about the economy and where things stand?
OLIVIA VALE: It signals that we're normalizing in the economy. So the pandemic was an abnormal time in the economy. Interest rates were cut 2%, 3%. Mortgage rates happened, giving buyers such a huge amount of buying power that it spawned this overactive market where everyone was jumping in, everyone was getting homes for almost free money. That's how great the interest rates were. And that kind of overstimulated the economy, that and other factors. We had inflation. Now that inflation is cooling. The Fed recognizes that it is. So the rates have dropped in order to, you know, just make borrowing a little bit more attractive again, which is great news for homebuyers.
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JOHN KRINJAK: So let's talk about what that means for us here in the greater Austin area as far as the real estate market goes. Obviously, we've seen prices come down a little bit over the last couple of years, more inventory on the market. So what does this interest rate cut mean kind of against that backdrop?
OLIVIA VALE: Okay. It's really interesting because it means two things. It'll mean something different in the spring as it means right now. So right now is a great time for buyers. The spring will be a great time for sellers. We expect more interest rate cuts from the Fed, which will make things quite competitive.
JOHN KRINJAK: So just to drill down on the buying side, conditions have been decent for buyers leading up to this. Do things get even better?
OLIVIA VALE: Yes, they do. They are better right now. So buyers have been faced with such high interest rates they can't even qualify for a loan. Even if they could refinance down the road. They can't get that loan in the first place because it was a 7% loan mortgage rate. Now we're seeing rates in the upper fives, which makes a huge difference to affordability. So the buyers are getting in the market right now. It's probably the best time is now this fall because you can get a home at a low price, then you can refinance down the road when rates are solidly low and a lot of local lenders will even give you a free refinance.
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JOHN KRINJAK: And so, if you're trying to sell a home, does it make sense to wait a few months until, like you said, things are going to get better in the spring?
OLIVIA VALE: Yes. I would say to sellers, unless you have to sell right now, it does make sense to wait to spring 2025, when there will be more buyers on the market and more people bidding for your home. And that puts you in a great position.
JOHN KRINJAK: Just kind of big picture. What do you think this change is going to do to prices?
OLIVIA VALE: Well, prices went up about 40% during the pandemic. They came down about 15%. So they're going to normalize now and go back to the, you know, 5 to 10% increase. We're going to see a return to normality for sure.
JOHN KRINJAK: All right. Olivia Vale, realtor with Roots Residential Group. Olivia, thanks for being here, as always. We appreciate it. You're welcome.