The recent 0.5% rate cut by the Federal Reserve has raised expectations for its effect on the real estate market in Southwest Florida. With mortgage rates already declining, local experts believe the trend could continue, potentially spurring increased housing activity.
On September 19, the Federal Home Loan Mortgage Corporation (Freddie Mac) reported that the average 30-year fixed mortgage rate had fallen to 6.09%, down from 6.2% the previous week and well below last year’s peak of 7.79%. While mortgage rates don’t directly follow the Fed’s rate changes, the broader impact of the cut could further drive rates down, stimulating both purchase and refinance demand.
According to PJ Smith, President of the Naples Area Board of Realtors, the market is optimistic about the Fed’s decision, despite the fact that changes in mortgage rates may not be immediate. “This time last year, mortgage rates were over 7%, and now we’re approaching 6%. Although mortgage rates don’t always mirror the Fed’s actions, we’re hopeful that this will positively impact the local housing market and encourage more activity nationwide.”
Smith also suggested that buyers who were previously priced out due to high insurance costs and mortgage rates might now find opportunities to reenter the market. “Summer sales have been slow, but this could be a sign that we’re returning to a more traditional seasonal market. First-time home buyers are expected to benefit the most, and agents need to emphasize the importance of homeownership for building equity.”
On the lending side, Tom Lytton, Executive Vice President and Chief Credit Officer at FineMark National Bank & Trust in Naples, stated that while mortgage rates may drop further, they will not be directly tied to the Fed’s rate reduction. “The Fed only controls the discount rate that banks pay. Mortgage rates are influenced by other factors like the 10-year bond market and mortgage-backed securities.”
Lytton predicted that mortgage rates would stabilize in the range of 5.5% to 6% within the next 18 months, which he described as a return to normal. He cautioned that buyers should not expect the historically low pandemic-era rates in the 3% range to return anytime soon.
For homeowners with low-rate mortgages, especially those locked in under 4%, selling may not be an attractive option unless life circumstances force a move. “Many people with mortgages in the 3.5% range are unlikely to sell unless home prices fall significantly or they have no choice but to move,” Lytton said.
Overall, while the Fed’s rate cut may provide a boost to the real estate market, particularly for first-time buyers, the long-term impact will depend on other economic factors and the ongoing stabilization of mortgage rates.
