Effects of Lower Mortgage Rates Differ Across U.S. Markets MABA MassachusettsRealEstate FirstTimeHomeBuyers MaBuyerAgent

 New Realtor.com data revealed that experts anticipate that mortgage rates will remain in the low six percent level through the end of the year, with additional decreases possibly reaching the high five percent range by the following spring, in response to the Federal Reserve’s announcement of a significant rate cut in September. Homebuyers who have grappled with high mortgage rates in recent years may find some relief from recently lowered rates, which could potentially encourage more homebuyers to enter the market.

 However, depending on how many people use mortgages, the impact of reduced interest rates will vary throughout markets. Markets that use mortgages more frequently will generally be more susceptible to fluctuations in interest rates, whereas locations where the percentage of homeowners who own their homes outright may be less affected.

 The report indicates that some eighty four percent of current mortgages have interest rates of six percent or less. Put another way, if mortgage rates go closer to six percent, consumers should anticipate seeing more homeowners become “unlocked,” particularly in areas where mortgage usage is strong.

 Realtor.com used the 2023 one Year Estimate from the American Community Survey in order to comprehend the variations in the geographic impact of decreased mortgage rates. The data showed that thirty nine point eight percent of homeowners in the U.S. owned homes while sixty point two percent of homeowners in the country had a mortgage. In actuality, fewer homeowners now have debt, which has increased the number of people who own their homes outright. In 2010, sixty seven point two percent of homes were delinquent, while the percentage of properties that were owned was thirty two point eight percent. 

Percentage of Homes Owned Outright Rises Amid Falling Number of Mortgaged Homes

 At the state level, states with higher percentages of homeowners living in mortgage-holding homes, such as the District of Columbia, Maryland, Colorado, Utah, and California, should see a rise in housing activity as mortgage rates decline. On the other hand, since a higher proportion of homeowners in West Virginia, Mississippi, Louisiana, New Mexico, and Arkansas own their homes outright, these states’ housing markets are probably less affected by reduced rates.

Top 10 States Where Mortgages Are Most Common:

1. District of Columbia

• (Percentage of owner-occupied homes with a mortgage: seventy seven point three percent)
• (Percentage of owner-occupied homes without a mortgage: twenty two point seven percent)

2. Maryland

• (seventy point seven percent)
• (twenty nine point three percent)

3. Colorado

• (sixty nine point one percent)               
• (thirty point nine percent)

4. Utah     

• (sixty eight point one percent)               
• (thirty one point nine percent)

5. California          

• (sixty seven point one percent)               
• (thirty two point nine percent)

6. Massachusetts

• (sixty six point four percent)
• (thirty three point six percent)

7. Virginia

• (sixty six point three percent)               
• (thirty three point seven percent)

8. Rhode Island 

• (sixty five point seven percent)               
• (thirty four point three point three percent)

9. Washington     

• (sixty five point six percent)               
• (thirty four point four percent)

10. Delaware           

• (sixty four point six percent)               
• (thirty five point four percent)

 Given the high usage of mortgages among the top fifty metros, homeowners in Washington, D.C., may be particularly vulnerable to the effects of reduced rates. In the D.C. region, specifically, seventy four point seven percent of homeowners in 2023 occupied properties that were mortgaged. Overall, only twenty five point three percent of DC residents were mortgage-free owners of their primary residence. The markets with the highest percentage of homeowners who have mortgages are Portland, OR (sixty nine point eight percent), Raleigh, NC (seventy two percent), Virginia Beach, VA (seventy one percent), and Denver (seventy two point four percent).

 Additionally, markets that have a larger percentage of outright ownership may be somewhat protected from the effects of reduced mortgage rates. Notably, among the fifty largest U.S. cities, New Orleans had the highest percentage of homeowners who are outright owners (forty five point eight percent). Pittsburgh came in second with forty five point two percent, Buffalo, NY, with forty five point two percent, Miami with forty three point eight percent, and Tampa, FL, with forty two point nine percent.

Top 10 U.S. Metros Where Mortgages Are Most Common:

1. Washington-Arlington-Alexandria, DC-VA-MD-WV                

• (Percentage of owner-occupied homes with a mortgage: seventy four point seven percent)
• (Percentage of owner-occupied homes without a mortgage: twenty five point three percent)

2. Denver-Aurora-Lakewood, CO            

• (seventy two point four percent)               
• (twenty seven point six percent)

3. Raleigh-Cary, NC         

• (seventy two percent)               
• (twenty eight percent)

4. Virginia Beach-Norfolk-Newport News, VA-NC       

• (seventy one percent)               
• (twenty nine percent)

5. Portland-Vancouver-Hillsboro, OR-WA         

• (sixty nine point eight percent)               
• (thirty point two percent)

6. Baltimore-Columbia-Towson, MD    

• (sixty nine point five percent)               
• (thirty point five percent)

7. Seattle-Tacoma-Bellevue, WA             

• (sixty nine point four percent)               
• (thirty point six percent)

8. Atlanta-Sandy Springs-Alpharetta, GA          

• (sixty nine point four percent)               
• (thirty point six percent)

9. Indianapolis-Carmel-Anderson, IN 

• (sixty nine percent)               
• (thirty one percent)

10. San Diego-Chula Vista-Carlsbad, CA

• (sixty eight point nine percent)               
• (thirty one point one percent)

Markets With Higher Homeownership Rates and Older Homeowners See Larger Share of Outright Homeownership

 It’s interesting to note that Realtor.com research indicates that markets with higher rates of homeownership typically have a higher percentage of outright ownership. Furthermore, a higher percentage of senior homeowners those sixty five and older is positively correlated with the occurrence of outright homeownership.

 In markets where homeownership rates are high, people usually buy homes while they are younger. In order to avoid taking on further mortgage debt, homeowners can restructure their mortgages or sell their properties and downsize as property prices increase over time. Older homeowners, who have had more time to benefit from both equity growth and property value appreciation, will profit most from this trend.

To read the full report, including more data, charts, and methodology, click here.

The post Effects of Lower Mortgage Rates Differ Across U.S. Markets first appeared on The MortgagePoint.

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