Las Vegas real estate leader: Why mortgage rates climbed after the fed cut interest rates

Nov. 10—When the Federal Reserve cuts interest rates, shouldn't mortgage rates follow? Not this time.

Mortgage rates moved in the opposite direction late last month, increasing 0.2 points the day after Federal Reserve Chairman Jerome Powell on Oct. 29 announced the second cut this year to the reserve's benchmark interest.

The quarter-point cut brought the Fed's benchmark rate to about 3.9%, down from 4.1%.

The central bank had pushed rates as high as 5.3% in 2023 to fight the worst inflation surge in 40 years. Lower rates typically ease borrowing costs across the economy — from mortgages and car loans to credit cards.

Analyzing why mortgage rates weren't lowered, Las Vegas Realtors President George Kypreos points to Powell's other comments during the meeting.

"A further reduction in the policy rate at the December meeting is not a foregone conclusion," the chair said.

That statement "shook the market," Kypreos said.

Kypreos spoke with the Sun about the impact of the rate cut, the effects of a downturn in tourism on the Las Vegas housing market and more.

This interview has been edited for length and clarity.

How is the impact of Powell's announcement manifesting in Las Vegas?

There are always folks that are on the fence, that are waiting for better terms. They're always hoping for lower rates and that's what they're basing their timing on. When something like this happens, it can really take the wind out of their sail.

They feel like it's going in the wrong direction, and sometimes folks will basically give up and renew a lease or wait for another time to purchase. Others will realize, "Hey, maybe I need to get what I can now in case it gets worse."

What would you say is the split between people looking who are holding off and those who see this as maybe the moment they should be getting in?

Ultimately, I always ask one question: Is your employment and your ability to pay your mortgage payment secure? And if the answer is yes, and they identify a home that they want to live in, then they should purchase the home.

I don't think a half a percent should move the needle on increasing their interest to do it or taking them out of the market. If they can afford the payment today, in the coming months or years if rates get lower, they can ultimately refinance. So that's the advice I always give buyers.

You said in a news release that the housing market is "Going through a bit of a reset." Can you explain what that reset is and what it means for homebuyers?

We had several years where the seller's inventory was tighter. Sellers were picking their price and they were getting it, and they were less likely to negotiate. In the past few months, we've seen inventory grow.

They must be more aggressive on pricing and more open to negotiating the terms. Since then, though, the market has tightened up a little bit. We've had sellers take their homes off the market and we have seen homes go under contracts since rates have dropped a little bit. So things have firmed up since I made that comment, but it is still a buyer's market.

Editor's note: Las Vegas Realtors reported 7,502 single-family homes listed for sale without offers at the end of September to mark a 37.4% increase from a year earlier. Available condos and townhomes jumped even more steeply, rising 50.5% to 2,605 units.

Tourism numbers have been a topic of national importance. With the layoffs we've already seen this year, are you seeing that drop in visitation having any impact in the housing market, or is that not really visible?

You could say that's baked into the decline in the median home price by a few thousand dollars month-over-month and the reset that I was talking about. If our economy and tourism was pushing it to the old levels, maybe there'd be more buyers willing to purchase homes in the market. So we may be feeling it. It's hard to say exactly what it is.

The rate of late payments on rental properties has been increasing throughout the year. Are you seeing that in the local market? And what do you think that says about our current economy?

I don't have a specific data point to mention, but I have heard from property managers and homeowners that are rental homes that when they're renewing their leases, they're not asking for increases like they had in the past. And they're potentially negotiating with tenants that are in place.

So the rental market is softening, and that could be tied to the local economy. I mean, those could be hospitality folks that aren't getting the hours they got last year, and they're having more difficulty paying the rent.

Editor's note: Nevada had the second-worst foreclosure rate in the nation during the third quarter ending Sept. 30, with 1 in every 831 housing units receiving a filing, according to a foreclosure report from ATTOM, a group that aggregates real estate data. Only Florida fared worse, at 1 in 814 units. The national rate was 1 in 1,402.

What do you think the housing market looks like throughout the rest of the year?

There are basically two lanes. Historically, in November and December, less sellers bring their home to market for holiday reasons or whatnot. But if rates stay lower and there's still some buyer demand, which there is, more homes get basically consumed, which firm up prices.

The other side would be (that) some Realtors will give advice to sellers saying, "Hey, if you're thinking about selling next year, why not put it on the market today to beat the competition." If that happens, and more houses hit the market and rates go the other direction, higher, prices could get a little softer.

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