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Mortgage rates are cooling, breathing new life into America's housing market.

After soaring to paralyzing heights, the 30-year fixed mortgage rate has plummeted to 6.47%, its lowest point in over a year. With inflation easing and economic growth slowing, experts anticipate the Federal Reserve will cut interest rates twice before the end of the year, potentially leading to lower mortgage rates.

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Realtor.com senior economist Ralph McLaughlin says it will be a golden opportunity to enter the market if mortgage rates dip further in September and December. The positive news extends to existing homeowners considering selling.

A recent Realtor.com analysis revealed that 86% of homeowners have mortgage rates below 6%. They have hesitated to sell, fearing losing the favorable rates.

"Home sellers have been sitting on the sidelines, not wanting to give up their COVID-era interest rates," Atlantic coast Mortgage Vice President and Senior Loan Officer Tan Tunador said.

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But if rates drop, homeowners will not feel quite so stuck, and new inventory could be added to the market, prompting more sales.

"There are a significant number of sellers that couldn't stomach - right or wrong - going from a 4% rate to a 7.5% rate," said Mason Whitehead, a Dallas-based branch manager for Churchill Mortgage. "But they can stomach going from 4% to something in the 5% to 6% range."

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Soaring mortgage rates sidelined many potential homebuyers, just as they did sellers. But with the prospect of lower rates, homeownership is becoming a more attainable goal for many.

"For some who didn't qualify at 7.5%, they will qualify at 6%," Whitehead said. "So you have more people able to buy as well."

In essence, a potential wave of sellers entering the market, combined with increased buyer activity due to lower rates, could revitalize the housing market.

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Homeowners who are considering selling should start preparing now.

"Mortgage rates have been improving, and they are bringing potential buyers out early, many of whom gave up on buying, either because of the low housing inventory or the higher rate environment in the past few years," Tunador said. "For sellers, listing their house early may give them the opportunity to sell before their competition hits the market."

Charlie Dougherty, director and senior economist at Wells Fargo, said that as rates drop, mortgage applications and refinancing activity have picked up.

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"All told, mortgage applications remain low, but the recent upturn is a promising sign that buying activity is starting to heat up and defrost a housing market frozen by higher interest rates," Dougherty said.

Even with a drop in mortgage rates, home prices are expected to remain high or decline only slightly. Markets that had been hot such as Denver, Phoenix and Austin, Texas, may see a more significant drop in housing prices. Experts agree that sellers should keep their housing price expectations in check.

"Housing affordability will likely remain strained given still-high mortgage rates and the rapid run-up in home prices over the past three years," Dougherty said. Uncertainty in the economy could "keep the pace of home sales relatively tepid."

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