By Serj Markarian, Licensed Real Estate Salesperson and Manhattan Market Expert

In June, prices decreased for the first time since the pandemic began, leading to a 0.1 percent reduction in inflation. This marked the first monthly decline in prices since May 2020 and brought the annual rate of inflation to its lowest level since March 2021. The Consumer Price Index (CPI) drop slowed the annual rate of inflation to 3 percent, down from 3.3 percent in May.

If this downward trend continues, the Federal Reserve may be closer to cutting the federal funds rate. However, experts believe this is unlikely to happen during their meeting at the end of July. September seems more probable for a rate cut, which could lead to slightly lower mortgage rates.

Meanwhile, signs of cooling inflation led to a recent dip in interest rates, prompting homeowners to refinance their homes. This resulted in a 15 percent spike in applications last week, the highest level since August 2022. Demand was also 37 percent higher than the same week last year, despite mortgage rates remaining the same. This indicates that homeowners are no longer waiting for significant rate drops and are moving forward with refinancing.

In contrast, applications for mortgages to purchase homes decreased by 3 percent. High home prices and the anticipation of a rate cut later this year have many buyers waiting.

For homeowners, even a half-point drop in rates could be beneficial, provided they stay in the property long enough to offset the upfront costs. Some real estate experts advise calculating the total costs, including closing costs (which can range from 2-5 percent of the new loan), to determine whether refinancing for a half-percent reduction is worthwhile.

For questions on the Manhattan real estate market, connect with Serj Markarian here.