As the Federal Reserve continues to ease borrowing costs, several housing markets are set to experience significant changes. A recent Realtor.com report highlights how falling mortgage rates will impact cities with a high percentage of homeowners still carrying mortgages, including Washington D.C., Denver, and Raleigh. These regions, along with others, are poised for the biggest adjustments as mortgage rates drop.

Markets Primed for Change

‍The Realtor.com report identifies Washington D.C., Denver, and Raleigh as the markets most likely to feel the effects of falling mortgage rates. In these areas, nearly 75% of homes are occupied by homeowners with mortgages. As borrowing costs decline, more buyers are expected to enter the market, leading to increased activity and possibly price adjustments.

Virginia Beach and Portland are also highlighted as regions sensitive to rate changes, largely due to their high reliance on mortgages. With the Federal Reserve having cut interest rates for the first time in four years, experts predict that mortgage rates could drop further, spurring a resurgence in homebuying activity.

The Mortgage Factor

While falling rates could stimulate housing markets, Realtor.com Chief Economist Danielle Hale emphasizes that many homeowners are still holding on to older, lower rates. This situation, often referred to as "golden handcuffs," means homeowners are reluctant to sell and take on new loans with higher rates than those they locked in years ago.

However, Hale points out that some of the most mortgage-dependent markets will likely see a surge in buying and selling activity. As rates drop into the low 6% range, with predictions of further reductions, many potential buyers may find it easier to afford homes, especially in the most affected cities.

Top Markets for Mortgage Sensitivity

The following cities have the highest share of homes with mortgages and are projected to see the greatest changes:

1. Washington-Arlington-Alexandria, D.C. – 74.7%
2. Denver-Aurora-Lakewood, Colorado – 72.4%
3. Raleigh-Cary, North Carolina – 72%
4. Virginia Beach-Norfolk-Newport News, Virginia-North Carolina – 71%
5. Portland-Vancouver-Hillsboro, Oregon-Washington – 69.8%

These markets are highly dependent on mortgage usage, making them more responsive to shifts in interest rates.

Markets with Less Impact

In contrast, some metro areas, where a large percentage of homeowners own their homes outright, are less likely to see major changes from falling rates. The markets with the highest share of homes without mortgages include:

1. New Orleans-Metairie, Louisiana – 45.8%
2. Buffalo-Cheektowaga, New York – 45.2%
3. Pittsburgh, Pennsylvania – 45.2%
4. Miami-Fort Lauderdale-Pompano Beach, Florida – 43.8%
5. Tampa-St. Petersburg-Clearwater, Florida – 42.9%

In these areas, the housing market is less influenced by mortgage rate fluctuations since fewer homeowners are reliant on borrowing.

Conclusion

As mortgage rates fall, certain U.S. cities are positioned to see significant impacts, especially those where homeownership relies heavily on mortgages. While homeowners in regions like Washington D.C. and Denver may experience more market activity, others in areas with high outright ownership will see less movement. Keep an eye on interest rates and your local market to determine how these trends might influence your homebuying or selling decisions.