SANTA CLARA, CA — As the Federal Reserve begins to lower mortgage rates, a new study from Realtor.com® suggests that markets with a high percentage of owner-occupied homes with a mortgage are poised for significant changes. The impact of these rate reductions will vary, with areas like Washington D.C., Denver, Raleigh, Virginia Beach, and Portland expected to feel the most substantial effects due to their high mortgage utilization.
Danielle Hale, chief economist at Realtor.com®, explains that while having a low-interest mortgage is advantageous for existing homeowners, it can also restrict their options. “Although mortgage rates have eased, market rates remain higher than the current rates for most homeowners, keeping them locked in ‘golden handcuffs,'” Hale stated. In high-mortgage areas, such as Washington D.C. and Denver, where nearly 75% of homes are mortgaged, shifts in market rates will likely influence homeowners’ buying and selling decisions. As rates decrease, real estate activity in these regions is expected to increase.
Following a significant rate cut by the Fed in September, projections indicate that mortgage rates may remain in the low 6% range through the year’s end, potentially dropping to the high 5% range by next spring. This decline offers relief to homebuyers who have grappled with elevated rates in recent years, encouraging more to re-enter the market.
The study identifies metro areas with the highest share of owner-occupied homes with a mortgage:
- Washington-Arlington-Alexandria, DC-Va.-Md.-W.V. – 74.7%
- Denver-Aurora-Lakewood, Colo. – 72.4%
- Raleigh-Cary, N.C. – 72.0%
- Virginia Beach-Norfolk-Newport News, Va.-N.C. – 71.0%
- Portland-Vancouver-Hillsboro, Ore.-Wa. – 69.8%
Conversely, markets with a higher proportion of outright homeownership may be less affected by rate changes. New Orleans leads with 45.8% of its homes owned outright, followed by Buffalo and Pittsburgh at 45.2%.
Additionally, markets with higher homeownership rates often feature a significant share of outright ownership, particularly among older homeowners. These individuals have typically purchased homes earlier in life, allowing them to benefit from property value appreciation and equity growth. This trend enables them to refinance or sell without incurring new mortgage debt, offering financial flexibility in changing market conditions.
As the Federal Reserve’s decision continues to shape the real estate landscape, these insights highlight how diverse U.S. markets will respond to evolving mortgage rates.
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