The lower-than-expected July jobs report caught politicians and economists off guard. On a positive note, the country’s inflation report showed tempering.

The two data points reinforced forecasters’ beliefs that bankers would have to lower the persistently high cost of money. Given continued housing price growth, however, a drop in interest rates could come with an increase in home prices, said one major Fresno Realtor.

Already, August’s mortgage rates are the lowest since April 2023, according to Investopedia.

In the lending world, borrowing costs have dropped ahead of the expected rate cut, said Cameron Hubbard, regional manager of Alameda Mortgage. Hubbard doesn’t expect “dramatic changes” in the next couple of months. He foresees rates hovering around mid-6% for a 30-year-fixed mortgage.

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“We’ve seen the worst of the market,” Hubbard said. “The rates got pretty high up there for a little bit, and they’ve come down since. Everything’s pointing toward lower rates, unfortunately, that comes with worsening economic data.”

Underlying Interest Growing

The first half of the year was marked by significant declines in home sales, both statewide and locally. June sales dropped 2.7% year-over-year in California. The 12 Central Valley counties’ average fall was 5.8% compared to 2023.

But the market may be picking up. Loans issued at Alameda have been grown nominally since last year, Hubbard said. Where he is seeing increases is in pre-approvals. To him, that means  underlying interest in buying a home.

For a long time, high interest rates — compared to that of 2021 — have kept sellers out of the market. Unless people have to move, many looking to move up have been on the sidelines, holding onto more favorable rates.

Hubbard worked with a woman who bought at a low rate, but family changes have her needing to upgrade.

“She’s at a 3.5% interest rate, and she’s kind of debating because rates are still in the sixes, but she’s to the point where her family size has increased, she might bite that bullet going from three-and-a-half to six-and-a-half,” Hubbard said.

Housing Availability Starting to Open Up

Darin Zuber, team leader of the Zuber Real Estate Team, says given the market outlook, it’s a good time to buy — with the right strategy.

Higher interest rates means lower prices than they will be when the interest rate drops and activity really picks up. With those higher rates, all it takes is refinancing.

“I’d rather buy now than in five months if the interest rates go down, which we don’t know. But that’s what they’re anticipating,” Zuber said.

Not even the sudden spike in interest rates in 2022 could stop home prices from rising.

Zuber had seen the same thing Hubbard had — a lot of potential buyers, but a lack of sellers. That had the market clogged up for people looking for opportunities. Cracks are starting to show in that bulwark with more availability.

“We have a few more homes coming on the market than we did,” Zuber said. “And there’s more activity than there was a couple months ago.”

Balanced Market Gone

The average home buyer doesn’t notice a quarter point change, Zuber said. They do notice a three-quarter point change, though, he said.

An ideal interest rate for both Zuber and Hubbard would hover around the high-5% range.

Instead of spending $16,000 a year on interest, a buyer might only have to spend $12,000.

Homes are getting multiple offers, Zuber said. Lower interest rates could encourage even more buyers.

Since the reactive interest rate hike in 2022, home prices slowed, but didn’t stop. Zuber said that has made predicting the market anything but natural.

Zuber sees prices growing even faster with an interest rate cut.

“How are prices going up when interest rates are this high? And prices are still going up, but I think when interest rates lower, I think they’ll go up even more,” Zuber said.