Bay Area residents hope housing market loosens up after Fed cuts interest rate
The Fed's decision to cut interest rates is sure to have an impact on the Bay Area real estate market, with the move encouraging both potential home sellers and buyers to get into the action.
Claudia Viek has been living in San Francisco's Bernal Heights neighborhood for about 50 years.
Her 800-square-foot house, which is actually two attached earthquake cottages, has been what she calls home for the past three years.
"I've been very happy here, but now it's time to get a larger place to live," Viek told CBS News Bay Area.
She's been looking to sell her home and buy a bigger home for her son and daughter-in-law to move into.
"It's been hard actually. I've been looking for seven months, and it hasn't been much inventory," she said.
But now, after learning that the interest rates were dropped half a percentage point by the Federal Reserve Wednesday, she is hoping for a bit more relief in the market.
"I hope it will make more people motivated to put their houses on the market so I'll have something to look at," Viek said.
This is the Federal Reserve's first reduction in four years, bringing the rate down to anywhere between 4.75% and 5%. It used to be anywhere from 5.25% and 5%.
"Realistically, I think we have still a ways to go before we get into the territory that really moves buyers in demand," Cameron Platt, broker and owner of Abio Properties, told CBS News Bay Area.
He said while this is a good starting point for the economy, it did come with a price for home buyers in the market.
"With this anticipated drop, I think it actually hurt the market a bit because people were sort of waiting on the sidelines and waiting for… nobody wants to buy any sort of good or services right before a sale. And so, there was some, 'Let's wait and see if it gets any better,'" Platt said.
He said while it wasn't a huge drop, it may be enough for buyers to get off the fence about purchasing a home in the Bay Area.
"It may be that the price the client thought was unattainable is now attainable. But let's be real clear; that buyers' ability to afford a purchase price is only one side of that equation. There's also the seller's expectations," he said.
Platt advised that sellers manage their expectations on their prices after the interest rate drop.
Officials said with this drop, it now means that the purchasing power for home buyers has lifted around $50,000 for those paying mortgages of about $2,000 monthly.
"Every rate move down will unlock some sellers and give them the ability to move into the marketplace, too," Keith Robinson, chief strategy officer of real estate agency NextHome, Inc., told CBS News Bay Area.
"I will take a 50-basis point cut and love it and hug it as hard as I can, because we need all the help that we can get for affordability. Especially in parts of the country where home values are incredibly high like where we live in the Bay Area," he added.
Robinson said while the rate drop can be some relief to sellers, more still needs to be done.
"It can't just be through interest rate cuts. That won't get us there. We need local municipalities to make it easier to build home. We need insurance costs to come down in California, which has been skyrocketing over the last two or three years," Robinson said.
Meanwhile, Viek is optimistic that she will be able to save a bit more money after the interest rate drops, and give right back to the local community.
"This reduction in interest rate, it really does circulate in the local economy in pretty profound ways. Local contractor's going to come and do that deck. I'm going to go to a furniture consignment store and could use more flexibility," Viek said.
The reserve said there will be more interest rate drops into 2025. Experts anticipate the next drop to be most likely after the presidential election.