The prospect of lower mortgage rates could perk up a sluggish metro Atlanta housing market, but experts say growing concerns about the economy and job security could also keep would-be buyers on the fence.
The Federal Reserve on Wednesday cut interest rates by a quarter-point in a quest to stimulate a weakening labor market. The benchmark rate influences the rates for all sorts of borrowing, including credit cards and mortgages, but they are not directly linked.
“An interest rate cut is like turning the thermostat down on borrowing costs,” Kristen Jones, broker and owner with Re/Max Around Atlanta, said in an emailed statement. “Mortgage rates tend to follow. Demand tends to pick up. Home prices may increase, and refinancing activity increases. That said, Fed rate cuts aren’t a magic wand if the broader economy is slowing.”
Mortgage rates have already dropped to the lowest level in more than two years. The average rate for a 30-year fixed mortgage is 6.22%, according to a daily snapshot Wednesday evening from trade publication Mortgage News Daily.
“The closer we can get to 6%, the more the market is going to go ahead and open up,” said John Ryan, chief marketing officer of the Georgia Multiple Listing Service.
Prospective homebuyers have sat on the sidelines this summer, discouraged by elevated mortgage rates and high prices. There are also concerns about the impact of new tariffs, persistent inflation and cooling job growth, experts said.
“People are just uncertain,” Ryan said. “They’re kind of on the edge about what’s happening with the economy.”
Home sales in August dipped almost 5% compared to the same month a year ago, according to Georgia MLS data for the 12-county metro Atlanta area. Meanwhile, the number of active listings has surged more than 25% year over year.
It’s also been a challenging time for builders of homes.
“People have been very much on the sidelines trying to play the market,” said Dusty Talbert, director of marketing for The Providence Group, an Atlanta-based builder of condos, townhomes and single-family homes. “Builders all across the metro area, including ourselves, have been offering some really great incentives to help combat that.”
Talbert expects, if mortgage rates keep dropping, more buyers will enter the market, which could raise competition and home prices. When interest rates dipped to historic lows during the COVID-19 pandemic, there were bidding wars and soaring prices.
Credit: HYOSUB SHIN / AJC
Credit: HYOSUB SHIN / AJC
Chris Burell, president of the Atlanta Realtors Association and chief growth officer at Engel & Völkers Atlanta, also expects more buyers to jump in.
“But I don’t expect it to be anything like we saw in 2020 to 2022,” Burell said. “Many buyers still have concerns about the economy and, more importantly, their jobs.”
After posting job declines in July, Georgia added 1,900 net jobs in August, according to the state Department of Labor. Over the year, jobs in the state have risen by 32,300, and the unemployment rate in August held steady at 3.4%, better than the national average.
“If consumers are unsure about job security, they typically do not rush out to purchase a home or investment property,” Burell said. “I believe that you will also see tariffs continue to impact consumer and company confidence, which can also lead to buyers opting to wait longer to purchase.”
Mortgage applications increase
Lower mortgage rates have now improved buying power, Ryan said.
At a mortgage rate of 6.15%, a homebuyer with a monthly budget of $2,000 can afford a $315,750 house, according to data from Redfin, which assumes a 20% down payment and certain rates for property taxes and homeowners insurance.
In January, when mortgage rates were around 7%, a homebuyer on the same budget could afford a $295,000 home, Redfin data shows.
Still, given increases in home values in recent years, it’s hard to find housing at those price levels in metro Atlanta. The median sale price in August was $405,400, up 1.4% from the same month a year ago, according to Georgia MLS.
Mortgage applications nationally have jumped almost 30% from a week ago, the Mortgage Bankers Association said Wednesday. Almost 60% of applications were for refinances, Mike Fratantoni, MBA’s chief economist, said in a statement.
“Homeowners with larger loans jumped first, as the average loan size on refinances reached its highest level in the 35-year history of our survey,” Fratantoni said.
Credit: HYOSUB SHIN / AJC
Credit: HYOSUB SHIN / AJC
Still, it’s not clear where mortgage rates will ultimately land. The central bank signaled at least two additional cuts this year, according to The Wall Street Journal.
“I believe you’ve already seen the rates drop in anticipation of the announcement,” Burell said, referring to the Fed’s decision Wednesday.
He also warned that last year, mortgage rates, which are tied to the 10-year Treasury yield, jumped up following Fed rate cuts. That was because investors demanded higher yields on long-term bonds to compensate for inflation risks, he said.
“If buyers wait until the rates drop, it also means they are going to be competing with more buyers and have less negotiation room,” Burell said. “While rates will fluctuate over the coming months, I don’t foresee a major drop on the horizon. The economic elements are just not there to justify a major drop.”
Jones of Re/Max Around Atlanta said her advice to homebuyers is to make the best decisions for themselves, regardless of market conditions.
“Housing prices will not likely fall any time soon due to pent-up demand and the sheer number of people in the household formation phase of life,” she said. “Mortgage rates will ebb and flow, and you can always refinance when they fall.”
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