What The Recent Rate Cuts Mean For Homebuyers In Babylon and Surrounding Areas

What The Recent Rate Cuts Mean For Homebuyers In Babylon and Surrounding Areas

Every cloud, as they say, has a silver lining – even if that silver lining is a bit tarnished. One good thing to come out of the coronavirus pandemic for homebuyers and homeowners who want to refinance is the recent rate cuts. “The Federal Reserve has cut short-term interest rates by 1.5 percentage points in less than two weeks and is making sure that money keeps flowing through the mortgage financing system — all to protect the economy from more damage from the COVID-19 pandemic.” But what do the recent rate cuts mean for homebuyers in Babylon and the surrounding areas?

Purpose of the Rate Cuts

The Fed’s two recent rate cuts now have interest rates approaching zero. This is an effort to keep the economy moving, especially the real estate sector, in light of the financial devastation wrought by the needed responses to the COVID-19 pandemic.

According to one insightful market watcher, “the Fed was leading rather than following. ‘The effects of the coronavirus will weigh on economic activity in the near term and pose risks to the economic outlook,’ the Fed said in explaining why it had slashed the target federal funds rate to a range of 0% to 0.25%. The idea behind these rate cuts is to “stimulate the economy when the worst of the pandemic passes and people get back to work and get full paychecks again.”

How the Rate Cuts Impact Mortgage Rates

The Fed is also practicing what is known as “quantitative easing,” which aims to keep money circulating and the economy percolating. That’s what lies behind the Fed’s buying “at least $500 billion of Treasurys and at least $200 billion of mortgage-backed securities.” These purchases are meant to help lenders have available money so they can lend to homebuyers and refinancers. And it might even push rates a bit lower.

The upshot of rate cuts and quantitative easing is that rates are low enough to get a lot of people thinking about refinancing or buying a home. But owing to fears of COVID-19 and the practice of social distancing, homebuyers may still be reluctant to get out and go home shopping. A drop in demand, especially in hard-hit areas like Long Island suggests that this is the case.

So with low rates and less competition, this is a great time for homebuyers. “The Fed’s March 3 and March 15 rate cuts are good news for those with or shopping for adjustable-rate mortgages . . . which are guided by Fed rate movements. ARMs will likely see lower rates at their next rest period . . . from a combination of the Fed’s half-point cut March 3 and the full-point cut March 15.”

The Outlook for Homebuyers

As a homebuyer in Babylon or one of the surrounding communities, you still need to be aware that inventory remains too low to meet demand. Even though some buyers are practicing social distancing, the rate cuts and low inventory mean that you’ll still be facing competition from other buyers. As the financial experts remind us, there’s only so much that lower mortgage rates can do to stimulate home sales. Mortgage rates and affordability aren’t the biggest challenges in today’s housing market . . . A lack of options continues to be the largest hurdle.”

Still, if you want to buy a home in Babylon or one of the surrounding communities, to take advantage of these historic low rates, there are a few things you can do to get an edge over your competition, for example:

  • Get pre-approved so you’ll know what you can borrow and in order to be perceived as a serious buyer.
  • Don’t be overly demanding with respect to contingencies and concessions.
  • People’s lives and schedules have been disrupted, so be flexible about closing.

Rate Cut Implications for the Housing Market

With mortgage interest rates at historic lows after the Fed’s latest rate cuts, many potential homebuyers in Babylon or one of the surrounding communities may be willing to shop for that new home. But then, on the other hand, COVID-19 has a lot of people self-quarantining, and this may offset the stimulating effects of the low rates.

The financial outlook and the fate of the housing market are still uncertain, according to economy watchers. “Monetary policy is not a quick-acting tool . . . It will be some time before we know whether this action was sufficient to sustain economic growth, but it’s a large and coordinated move that will put households, the housing market, businesses, and the financial sector on better footing.”

One thing is certain, though. Right now is a great time to buy a home in Babylon or one of  the surrounding communities – mortgage interest rates may never be this low again. And there’s another certainty in all this: with low inventory and possible stiff competition, the services of a good local real estate agent have never been more necessary.

An Agent to Help You Take Advantage of Rate Cuts

So do you want to take advantage of this unprecedented opportunity provided by the recent rate cuts? If you want to buy a home in Babylon or one of the surrounding communities, now is the time – if you can find the home you need.  Yes, you may even have to shop online to protect your health. I am a Certified Buyer Representative.  I have the experience, expertise and local knowledge to help you under this unique set of conditions. To discover more, contact me today at (631) 357-4819.

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