The average 30-year fixed-rate mortgage has fallen below 7%, settling at 6.99%, providing some relief for participants in the housing market. William Raveis Mortgage Regional Vice President Melissa Cohn joins Wealth! to discuss the outlook for the housing market.

Cohn notes market participants are looking for rates to fall "well below 7%" as affordability remains a significant challenge. She emphasizes that for homebuyers, "it really is all about the monthly payment," rather than just focusing on the actual interest rates.

Cohn believes that the "American Dream" of homeownership will become more attainable as interest rates decrease, stating, "It is quite likely that when interest rates come down, more buyers will come into the marketplace, and real estate prices will move upward," emphasizing the role that interest rates play in driving the housing market.

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This post was written by Angel Smith

Video Transcript

We're joined by Melissa Cohen, who is the William Ravis Mortgage Regional Vice President.

Great to have you here with us today.

Melissa first.

Thanks so much.

Yes, absolutely.

So you, you just heard the breakdown of where we're hovering right now, still around that 7% marker.

Does the buyer sentiment change at all at this level?

And if so, where could we see some potential bids be thrown into the ring?

I mean, psychologically, I think people want to see rates well below 7%.

Now, real estate values have remained quite high even though they've dropped a little bit recently that, you know, as you said, the affordability factor becomes an issue.

I think that when interest rates drop below seven, if we get them down to six and three quarters, six and five eights, maybe 6.5 percent that we'll see, you know, renewed interest in the home buyers coming into the marketplace.

And the other thing that we have to take into consideration is when is the fed gonna start cutting rates?

It's the spring selling season?

Do people want to buy now know that they're taking a higher interest rate?

But having the ability to refinance at some point, hopefully in the next 12 to 24 months in order to be able to reduce their monthly payment, because it really is all about the monthly payment and not about the print rate.

Now, yesterday, we had Doug Duncan who is Freddie Mac's chief economist here.

I asked him his thoughts on buying now versus waiting for rates to decline.

I would love to hear your reaction to what he said on the other side.

Let's take a listen.

So if at today's price and the amount of money that you'd have to borrow, the payment fits in your budget that you have, then you buy today, you're a homeowner.

If you're speculating on whether interest rates are gonna fall, whether prices are gonna fall now on refinancing, but then you've moved into the realm of being a speculator.

Some people can afford that.

A lot of entry level buyers can't really afford that.

And Melissa, I wanna get your reaction to that as well here, especially as there could be those who are tempted to speculate right now.

I think that really, it's all about, you know, affordability and whether or not you need to buy a home.

I mean, you know, the American dream is that everyone becomes a homeowner.

Um And it is, I believe quite likely that when interest rates come down, that more buyers will come into the marketplace and real estate prices will move upward.

So to be able to buy today and if you can afford to buy today and become a homeowner, you know, obviously we all hope that interest rates will come down.

But I don't really mean that think that that makes you a speculator in the market for a lot of new home buyers out there.

One of the things that they need to remember, especially if going into a market like this and trying to figure out where they're going to get the best bang for their buck long term.

Well, I think that they have to look at themselves financially first.

Where do they stand in terms of their career, in terms of income is their income stable.

You know, if they can afford to qualify for a mortgage today and they know that their income is growing, you know, even if rates were not to go down, then as their income grows, that the affordability factor for them will improve.

Um It's also a question of, you know, are you buying something just to get into it today that people shouldn't settle on something that's less expensive in order just to have a lower monthly payment, if you're buying something that you're not gonna see yourself in for a very long period of time, because there are transaction costs.

You have to pay broker's commissions, their closing costs, transfer taxes that you have to pay.

So you have to make sure that the decision to buy today is a prudent one and one that will withstand, you know, the, the next two or three years.

So to make sure that you haven't really to throw money out the window, are, are some of those costs making new homes more appealing for new homebuyers.

Well, I mean, if someone's purchasing a new home, there are builders who are actually give people discounts on their closing costs and discounts on rates, which is obviously an advantage.

Um you know, closing costs vary by state to date.

State.

There are certain states where closing costs are a lot less expensive and other states where it's a lot more expensive.

So you have to take not only the purchase price in the mortgage, but all of your closing costs into consideration.

Banks will want to see that you have enough money for your down payment that you have enough money for closing costs and that you have some money in reserve.

Now, banks today have become prudent.

We're not, you know, banks are not throwing out no income verification loans and telling people, oh, you should just buy now and worry about it later.

You know, banks are really trying to make sure that every mortgage they make is one for the buyer that's going to be able to make their monthly payments.

Certainly Melissa Cohen, who is the William Raves Mortgage Regional Vice President.

Thanks so much for taking the time here with us today.

My pleasure.