CORPUS CHRISTI, Texas — The Federal Reserve cut interest rates for the first time this year last week, dropping them by about a quarter of a percent from 4% to 4.25%. While this could put more money in homebuyers' pockets, experts warn that lower rates may also drive up home prices.
David Garcia, a Coastal Bend realtor and certified expert advisor, says the rate cut is positive news overall.
"In the big picture that's a good reduction overall. That eliminates some of the costs buying homes."
While mortgage rates aren't directly tied to Federal Reserve cuts, they do receive an indirect boost from the policy change.
"You're either going to save money monthly or buy a little bit more home because now your payment went down."
Garcia provided a concrete example of potential savings for homebuyers.
"For a $400,000 home you're at about $100-150 less a month in your principal overtime."
The rate reduction comes as good news for anyone refinancing or buying a home, but data shows young people aren't dominating the new homeowner market. In 2023, 19% or about 8.5 million young adults ages 25 to 34 still lived with their parents or in-laws.
"A lot of it has to do with student loan debt, finances, the cost of living and overall job stability."
Garcia recommends that young adults living at home use that opportunity to save for a future down payment. However, he cautions against rushing into just any purchase, as lower rates typically increase market demand.
"When the rates go down, more buyers come into the market. What happens? It increases demand. When you start to increase demand, now you have multiple offers, prices may start going up."
For those considering a home purchase, Garcia advises acting strategically.
"Making a move when you're ready. At least buy something. It may not be your dream home, it may be your starter home but if you are in the market to buy a home I would do it as soon as you can. Lock in that good rate before prices go up."
Experts are predicting a strong possibility that rates will go down again at least two more times by the end of the year.
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