Here’s why interest rates matter for Tennessee real estate in 2024

Happy New Year to our Birthright Title friends and customers! We can’t wait to see what 2024 has in store for us, especially since there are so many reasons for optimism, including Nashville once again being identified as a market to watch by the National Association of REALTORS. However, let’s talk about last year for a bit to give context as to why interest rates are so important in determining how this year will play out.

Why are we doing this? It’s imperative to look back on what made 2023 such a difficult market for all of us involved in real estate. Yes, we’re talking about inflation and interest rates again. You’re probably tired of hearing those two little words after the past year, but they truly handcuffed both buyers and sellers. Here’s why. First from the buyer’s side: As rates rose, many buyers, especially those hoping to become first-time homebuyers, were priced out of a drastically different market than they planned on.

However, rates also affected sellers who chose to stay in their current homes instead of testing the market. Consequently, even with fewer buyers in the market, the lack of inventory available for sale — a hot topic for years — didn’t experience any improvement either.

So, what’s changed? As you probably know, the Federal Reserve paused its interest rate in December and signaled multiple cuts would occur over the next year. (This group meets again at the end of this month, so we’ll see what happens then.) While the Fed’s rate isn’t the same as the mortgage rate you’ll pay on a home, it’s certainly related. In fact, after this announcement in December, mortgage rates immediately started to decline.

All of us in real estate know why rates are so important to both buyers and sellers. Even a fraction of a percentage point represents significant savings for buyers every month. For example, here’s how much a buyer would save when mortgage rates finally dropped below 7% again in December compared to just a few months ago. “Based on the new average rate of 6.95%, the monthly costs for a 30-year fixed rate mortgage worth $300,000 would be $1,986. Compared with October’s peak rate of 7.79%, that equals $172 in monthly savings. For a mortgage worth $400,000, the savings would be $229 per month.”

Of course, interest rates, which fluctuate daily, are not the only factor in determining the housing market. Lower rates may mean more listings to choose from, but it will also bring more potential buyers back into the market. This could lead to more competition, higher prices and a competitive bidding process. It’s why it’s so hard to time the market – whenever is a good time to buy (or sell) for you could be the perfect time, after all.

All of this makes it essential to surround yourself with trusted real estate professionals, no matter if you’re on the buying or selling side. When you’re ready to close your deal and start your next chapter, the BT team would love to be your Middle Tennessee title and closing choice! Reach out to us anytime.