San Francisco Chronicle

Nadia Evangelou, senior economist and director of real estate research for the National Association of REALTORS®, said more Fed rate cuts are anticipated this year, and 30-year mortgage rates could come down to 5.9% by the end of 2024.

Decreasing rates mean homebuyers have more buying power. Evangelou said right now, the average monthly mortgage payment for the median-priced home in the Bay Area ($1.45 million) is around $7,100.

If rates drop to 6% — historically known as the “magic number” for mortgage rates at which housing market activity is triggered — that monthly payment could drop to just below $7,000; if they hit 5.8%, it would be $6,800.

With rates currently at 6.2%, she said, 12.2% of Bay Area households can afford that median priced home. Dropping to 6% would mean 12.7% — an additional 8,350 households — could afford to enter the market.

But there is a downside, she said. “Areas where housing inventory is already low, this boost in demand can lead to more buyers,” she said. Increased demand “puts upward pressure on home prices as buyers compete for a limited number of homes. This price increase can offset some of the affordability gains from lower mortgage rates.”

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