The Federal Reserve’s decision to cut interest rates, with the prospect of more to come, was widely hailed as a boon for the local housing market because it will lower mortgage rates, and in turn, make it easier to afford a house. Without question, lower interest rates will reduce mortgage payments. However, that alone will not address the significant obstacles many young families face when buying a house or upgrading to a larger space as they have children.
The high rates we have had for years have slowed demand for sure, discouraging first-time buyers from entering the market and keeping current owners with low rates locked into homes they might have already outgrown. That has created a tight market by reducing inventory and the number of buyers. At the same time, the low inventory has kept housing process increasing here on Long Island. From that perspective, lower rates should entice more sellers off the sidelines and make it easier for new buyers to afford a home. But it won’t happen overnight, and the short-term prognosis is not as rosy as some would like new home buyers
to believe.As buyers re-enter the market, that will only increase competition for homes. Yes, more inventory should come onto the market as people look to upgrade to larger homes, but that is not likely to be enough to handle the increased demand from buyers. We all know people who have had to bid above the asking price to get a house, and we can expect that to continue into the near future.
