GOOD Deals is a biweekly opinion column about Wilton real estate published in partnership with Kerry Gutierrez with Douglas Elliman Real Estate.
Wilton’s real estate market slump has continued, but the Federal Reserve’s recent rate cut could be the spark that starts a shift. With more rate cuts likely on the horizon this year, buyers and sellers are beginning to feel the effects. Now that the shock of the 50 basis point cut has started to cool, it’s time to assess just how much of a game-changer this will be.
Current Market
Inventory remains the real estate market’s Achilles heel, keeping prices high and sellers in the driver’s seat. Buyers are out there but can’t buy what isn’t for sale. Year-to-date (YTD) new listings are down 3% over the past two years, but more sobering is that it is still 42% below pre-pandemic levels. This same scenario is playing out across all of our neighboring towns.
Interestingly, even with low inventory, closed sales have inched up slightly since the 2022-2023 post-pandemic period, and in Wilton are now only down 6.8% of pre-pandemic — again, showing us that the buyers are out there!
While the broader Fairfield County market shows homes selling for an average of 102% of the list price, Wilton is outperforming that. Over the past six months, homes in Wilton have been selling for an impressive 105% of the asking price. Sellers still hold the upper hand, but buyers are increasingly eager to get in on the action — if they can find a home, that is.
The Rate Cut
In a surprise move to many, the Federal Reserve cut interest rates by 50 basis points. This, of course, does not impact mortgage rates directly, but it does signal a downward trend. Mortgage rates had already started declining before the Fed’s announcement, but their continued descent could be slower than some would hope.
Projections for when the 30-year fixed mortgage rate will dip below 6% vary. Wells Fargo forecasts a 5.95% rate by Q2 2025, while both Fannie Mae and the Mortgage Bankers Association predict rates around 5.9% by the end of 2025.
According to Logan Mohrashami, Lead Analyst at HousingWire, three factors are necessary for mortgage rates to fall further:
- Improved mortgage spreads
- Softening labor and economic data
- The Fed adopting a more dovish stance and showing a willingness to do more to help the economy stay out of recession
The Next 6 Months
As rates continue to decline, the real estate market will gradually feel the effects. The lock-in effect is weakening as homeowners may be more enticed to sell — and ultimately purchase their next home — in a lower-rate environment. This won’t lead to a flood of new inventory, but it will likely be a slow trickle that will, unfortunately, barely scratch the surface of the inventory issue.
The U.S. Housing starts are a widely used indicator of the health of the housing market, construction industry, and the greater economy. According to data from the US Department of Housing and Urban Development, single-family housing starts were up 58% in Q2 2024 compared to Q4 2022. This trend is likely to continue. Housing starts this Fall will lead to new inventory in the spring and summer of 2025.
The Next 12 Months
The next year will start to shift market factors that will ease the affordability issue created by sky-high housing prices and elevated mortgage rates.
According to Lawrence Yun, chief economist of the National Association of Realtors, the current seller’s market should shift to a more balanced market. Neither side will hold a significant advantage, but both parties will have equal negotiating power. We see this starting to play out in the national market as the pace of price increases slows. Zillow forecasts home values to rise 2.1% in 2024 and 1.4% by August 2025.
Inventory and home sales should gradually rise through the remainder of 2024 and into 2025, as potential buyers finally feel confident enough to lock in mortgage rates in the low 6s or high 5s — rates still well below the 40-year average.
Final Thoughts
The Federal Funds Rate cut, prompted by easing inflation and slower job growth, is expected to benefit the real estate market gradually. While the effects won’t be felt overnight, this is a step in the right direction for both buyers and sellers. Housing remains a key driver of wealth creation, and according to a recent Fannie Mae survey of 150 top economists, over 50% believe that a $500,000 home purchased in 2024 will appreciate $100,000 to $160,000 over the next five years.
The market may not be perfect, but if your finances are in order, now could be a great time to jump in. After all, waiting for perfect market conditions might just keep you waiting forever.
