Interest Rates Just Dropped. Here's What You Should Know.

The real estate market in Southern New Hampshire has been a whirlwind for buyers and sellers alike. With fluctuating interest rates, rising home prices, and a limited inventory of homes, understanding today’s market is crucial for making the right decisions. Let’s dive into how recent trends, especially the Federal Reserve’s actions, are impacting the local real estate landscape and what it means for you.

The latest data shows mortgage rates have steadily declined, with the 30-year fixed-rate mortgage dropping to 6.09% in September 2024, down from a high of 7.79% in late 2023. For those looking to purchase in Southern NH, this is a big opportunity. Lower rates mean more manageable monthly payments, making homeownership more affordable for buyers who’ve been waiting for the right moment.

These lower rates are largely thanks to the Federal Reserve’s recent cuts to interest rates. While the Fed doesn’t directly control mortgage rates, its actions influence bond yields, which in turn impact mortgage rates. With Southern NH’s market already competitive due to limited inventory, this dip in borrowing costs may encourage more buyers to act now.

The Fed’s recent decision to cut its benchmark interest rate by 50 basis points has already rippled through the housing market. Lower borrowing costs make it easier for buyers to qualify for loans, which may drive demand for homes in towns like Manchester, Nashua, Bedford, and Concord. However, this increased buyer activity could push home prices even higher, especially in areas where inventory is already tight.

The paradox of lower mortgage rates potentially leading to higher home prices is a real concern for many in the real estate industry. While the immediate effect of a rate cut is to make homes more affordable by lowering monthly payments, the longer-term consequence can be more competition among buyers. As more people qualify for loans and enter the market, the increased demand can drive prices up, particularly in areas with limited housing inventory.

New Hampshire has seen steady home price growth, with the median price of existing homes rising to $416,700 in August 2024. While this 3.1% increase over last year reflects national trends, many Southern NH communities are still more affordable than other parts of the state. Towns like Londonderry and Merrimack offer slightly lower price points while still providing easy access to Boston and local amenities.

For first-time buyers in New Hampshire, the combination of lower mortgage rates and increasing prices can feel like a mixed bag. While monthly payments might be more affordable, rising home prices mean competition is still fierce for starter homes. Sellers in New Hampshire, however, are in a good position to attract motivated buyers looking to take advantage of these lower rates.

One potential solution to the housing affordability crisis is an increase in the supply of homes. The Fed's rate cut may provide some relief on this front as well, as it lowers borrowing costs for builders, especially smaller developers who rely on loans tied to the Fed's rates. This could incentivize more construction projects, particularly in areas where housing demand is high but supply is limited.

Inventory remains tight in New Hampshire, especially for smaller, more affordable homes. Many homeowners who refinanced during the pandemic at low rates are reluctant to sell, which limits the number of homes available for new buyers. The Fed’s rate cut could encourage builders to ramp up new construction projects in New Hampshire, particularly in areas like Derry or Hudson, where demand is high.

New construction could provide relief by increasing the supply of homes, but it will take time for these developments to come to market. In the meantime, buyers may find more options in the larger home market, as families who are upgrading to bigger properties benefit from the lower borrowing costs.

For Buyers: The current drop in mortgage rates is a rare opportunity to lock in lower monthly payments. But with competition heating up and prices potentially rising, acting quickly and strategically is essential. Southern NH towns like Windham, Hooksett, and Pelham are highly competitive, so having a strong offer ready is key.

For Sellers: Declining mortgage rates are bringing more buyers into the market, which could drive multiple offers and higher sales prices. Sellers thinking of moving to a larger home may find it easier to sell now, especially in sought-after neighborhoods like Bedford or Exeter.

For Real Estate Agents: This is a pivotal moment for guiding clients through the complexities of buying or selling in Southern NH. Agents who stay up-to-date on market conditions, financing options, and the latest economic trends will be better positioned to help clients navigate this fast-moving market.

The New Hampshire real estate market is in a unique phase as mortgage rates drop and the Federal Reserve signals more rate cuts. While these lower rates provide buyers with a window of opportunity, the ongoing issue of limited inventory means competition could drive home prices even higher. For both buyers and sellers, staying informed and working with an experienced local agent is key to navigating this evolving landscape.

Need expert advice on buying or selling in New Hampshire? Reach out to us today to get the local insights you need!