It was a tipping point for house hunters. Beaten down by rising prices, meager housing choices and bidding wars, they saw rates as one more obstacle and called it quits, causing sales to plummet, even in the hottest of U.S. markets.
"It was somewhat of a surprise to see the degree and intensity of the pullback," said Robert Dietz, chief economist of the National Association of Home Builders. "Five percent at those pricing levels was enough to take the wind out of sails of the housing market."
Housing price increases continue to moderate according to the latest data from the S&P CoreLogic Case-Shiller house price index. In eight of the 20 largest U.S. cities, year-over-year price increases fell below 4%. (Photo: Feverpitched / iStock)
Enter Federal Reserve Chairman Jerome Powell, who in December promised patience on further interest rate hikes and, on Wednesday, predicted that rates wouldn't budge for the rest of the year.
Mortgage rates are at 4.5 percent and aren't forecast to rise much for this year.
Here's what it means for this year's homebuying market.
Cars outer-space?: Toyota's next big vehicle is over the moon
Cheesecake business: Baking to escape stress, Michigan woman turns cheesecake into viable business
More buying powerBuyers won't have to race against the clock like in 2018 when rates started at 4.25 percent in January and were a half-point higher by April, said Mike Fratantoni, chief economist of the Mortgage Bankers Association.
"By the time they found a house, prices and rates had priced them out," he says. "That's very frustrating for buyers."
Lower rates – coupled with rising wages – helps affordability, too. The monthly payment for a $200,000, 30-year fixed mortgage is $71 dollars cheaper at 4.5 percent versus 5 percent. That doesn't sound like much but can make the difference for a buyer on the margins. Total interest savings over the life of the loan is more impressive at $21,699.
"While folks might not have hit the bottom of the rate cycle – no one can perfectly time markets – on the historic side, these are still very attractive rates," said John Pataky, executive vice president, chief consumer and banking executive at TIAA Bank.
Take the gains and runNEWSLETTERSGet the Managing Your Money newsletter delivered to your inboxWe're sorry, but something went wrongA collection of articles to help you manage your finances like a pro.Please try again soon, or contact Customer Service at 1-800-872-0001.Delivery: FriInvalid email addressThank you! You're almost signed up for Managing Your MoneyKeep an eye out for an email to confirm your newsletter registration.More newsletters
On the seller's side, there's finally some evidence that more move-up buyers are getting into the market, eventually freeing up inventory of desperately needed lower-priced homes. The average mortgage balance for purchases has reached record levels because of more move-up buyers, according to Fratantoni.
"It's a musical chairs game," he said. "You need someone in the higher end to move and it works its way down the ladder, eventually opening up an entry-level home."
Inventory in general has also been inching up, largely on the higher end, which has also seen the greatest slowdown in prices. Perhaps the trifecta of more supply, softening prices and lower rates is enough to convince some once-stubborn owners to trade up, adding more affordable homes on the market.
“We're seeing renters coming in, saying their landlords are selling the house and they want to buy.”
Nicole Reuth, branch manager at Fairway Independent Mortgage Corp. in Denver.In Denver, there's anecdotal evidence that single-family landlords are putting their homes on the market to realize the gangbusters appreciation from the last several years – which slowed significantly in the fourth quarter – and reinvest those gains in a smaller, multifamily unit, says Nicole Reuth, branch manager at Fairway Independent Mortgage Corp. in Denver.
"We're seeing renters coming in, saying their landlords are selling the house and they want to buy," says Reuth, a real estate investor herself with 22 properties. "These are houses under $500,000. Sellers know they have something in very high demand."
Unexpected fuel?Mark Fleming, chief economist at First American, has a contrarian view. First, rates aren't low enough to shake off the rate-trap effect, when homeowners decide against selling their home because they have a mortgage rate lower than the current levels.
"You would need rates to go down into the high 3s to undo the effects for a lot of existing homeowners," he said.
Pickup problems: Passengers in newer trucks are at higher risk of injury or death, shows latest crash test
How to invest your winnings: Should you take your Powerball ticket jackpot as a lump sum or annual payments?
Some inventory is coming onto the market, but not enough he says to satisfy demand. He still expects a wave of first-time homebuyers to come back into the market – especially given that rates have moderated from those scary, 5-percent levels.
"A lot of the softening may be off the table now. Yet again, we're setting ourselves up again for a pretty solid seller's market," he said. "I wouldn't be surprised if appreciation starts to pick up again."
Buyers: What you can controlAs a buyer, you can't control the Fed or any of the other factors that could affect long-term interest rates. But there are a handful of things you can control that determine the interest rate you get on your mortgage.
Down payment: The more money you put down, the smaller your rate – with all other factors equal. That's because you're taking on more risk as a buyer and lessening the risk for your lender. On a monthly basis, you can eliminate private mortgage insurance portion if you can get a 20-percent down payment.
Credit rating: Lenders give the most favorable rates to people with higher credit scores who demonstrate a positive track record of repaying debts. On a $216,000, 30-year, fixed-rate mortgage, you'll get a sub-4 mortgage rate if you have the highest tier of credit scores – 760-850 – versus a 4.5-percent rate if your score is 660 to 679, according to FICO.
Debt-to-income: Lenders also look at the percentage of your debt payments to your total monthly income. The higher the percentage, the riskier the loan. If you can, pay off the debt with the highest monthly payment to lower your DTI.
CLOSE
The barrier for entry into the housing market today has risen so much that even wealthy people are holding off on buying homes. A 2018 study from the Joint Center for Housing Studies of Harvard University found that high-earners were increasingly renting. Buzz60
This trader expects Apple streaming platform to make streaming easier 7 Hours Ago | 02:42
Nexium (CURRENCY:NXC) traded down 2.7% against the U.S. dollar during the 24-hour period ending at 23:00 PM E.T. on March 15th. One Nexium token can now be bought for about $0.0079 or 0.00000198 BTC on major cryptocurrency exchanges including Bittrex and HitBTC. In the last week, Nexium has traded 29% higher against the U.S. dollar. Nexium has a total market capitalization of $524,784.00 and approximately $996.00 worth of Nexium was traded on exchanges in the last day. 
Wall Street analysts predict that Dine Brands Global Inc (NYSE:DIN) will announce $245.14 million in sales for the current fiscal quarter, according to Zacks Investment Research. Two analysts have provided estimates for Dine Brands Global’s earnings, with the lowest sales estimate coming in at $244.87 million and the highest estimate coming in at $245.42 million. Dine Brands Global posted sales of $188.16 million during the same quarter last year, which suggests a positive year-over-year growth rate of 30.3%. The company is expected to issue its next quarterly earnings results on Wednesday, May 1st.
For its fourth quarter of its fiscal 2018, the security systems services provider unveiled revenue of $1.19 billion, marking a 7% from the same period a year ago. The company’s loss tallied up to $149 million for the period, while in the year-ago period the business posted an income of $638 million.
Jazz Pharmaceuticals PLC (NASDAQ:JAZZ) CFO Matthew P. Young sold 1,152 shares of the business’s stock in a transaction on Wednesday, March 6th. The shares were sold at an average price of $135.41, for a total transaction of $155,992.32. Following the sale, the chief financial officer now directly owns 38,700 shares in the company, valued at $5,240,367. The sale was disclosed in a legal filing with the SEC, which can be accessed through the SEC website. 
Nasdaq flashing a historically bullish signal 18 Hours Ago | 05:06 Disclaimer
Greg Miller