How Will Interest Rates Impact Buyers & Sellers in the Months Ahead?
With the recent changes to interest rates, many potential home buyers and sellers are wondering how this could impact their ability to buy or sell. We asked Mortgage Advisor Jeff Gibson at Generations Home Loans in Gig Harbor for his insights about current interest rates, and he provided us with useful context, valuable advice, and his smart perspective.
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I was recently asked about the state of the real estate market in Washington state for the 4th quarter of 2025 and even into 2026.
Unless you’ve been hiding under a rock for the past 5 years, you are probably aware of the volatility of the market in the recent past. Since before Covid gripped the world, the real estate interest rates have been bouncing all over the place. During the past 5 years, we have seen interest rates as low as 2.5% and as high as 9%. Many people—those with interest rates in the 2’s and 3’s—have been unwilling to lose such a stellar rate and their decision to buy, sell, or refinance their properties have been influenced by these rates.
I am happy to report that average interest rates have started their much-awaited descent, recently falling to a 3-year low. This has certainly had an effect on the real estate market on the whole, seemingly bucking the normal trend of a fall/holiday slowdown in both inventory for sale and interested parties looking to purchase.
If you are looking to purchase or sell a home in the 4th quarter of 2025 or in 2026, here are some things to consider:
- The Fed has 2 more meetings in 2025, one in October and the last in December. It is widely expected that both meetings will bring a 0.25% rate cut. The markets are anticipating these cuts and have continued to adjust interest rates lower prior to the actual reduction. This is why there is often not significant rate movement immediately following the Fed cut.
- Right now, and for the past 3 years or so, home buyers have had the edge on sellers in that there just are not as many people wanting to buy any real estate. This has assisted potential buyers by allowing them to be more choosy and fickle in what they are opting to buy and more aggressive in their pursuits of a great deal and terms when they do decide.
- This has left sellers in the tough position of lowering their sales prices and even offering sellers concessions to entice buyers to purchase their home. While I believe that our market is still in this pattern, there is sign of this weakening. As the interest rates creep lower, more buyers will re-engage with the market. With more demand on the still limited inventory, this power struggle will swing into the seller’s side. This will bring higher prices, less negotiating and even multiple offers. All benefits to the selling side of things.
If you are considering selling your home during this time, it is imperative that you are priced correctly.
A good REALTOR® has so many tools to assist in this process. Utilize not only this information but also their experience as you decide on a price. Communicate together on a regular basis. Be willing to reduce your price, offer concessions, and be patient. Your house will sell.
If you are considering purchasing, first of all, jump now or at least sooner rather than later.
You still can dictate a lot in the sale process and even though the interest rate is still higher than it will be next year, it’s not a lot higher and you can always refinance when rates do drop. What you may not be able to do is beat out other interested buyers once the quantity of purchasers increases in the marketplace. Get the right house now, and the right interest rate later. Wouldn’t this be preferable to the opposite—the wrong house with the right interest rate? If you question this ideology, make 2 lists: The list of the homes you lived in and the list of the interest rates you possessed. Which list do you think will be more accurate and easier to compile?
Also, take solace in the fact that the current interest rates are actually in line with the average rate over the past 20 years. Buying a home is still considered one of the safest, most lucrative investments that you can make.
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Thank you for your insights, Jeff Gibson!
Jeff Gibson is a Mortgage Advisor at Generations Home Loans in Gig Harbor. You can learn more about Jeff and reach out to him here.