In its most recent move on Sept. 18, the Federal Reserve cut interest rates by a full half percentage point, more than some economists had predicted, and a suggestion to previously priced-out buyers that lower mortgage rates might help them purchase their dream home. 

 What does this interest rate deduction really mean to the fall and winter housing market? 

• Mortgage rates may not fall much further. Economists point out that the very prospect of rate cuts has helped to send mortgage rates lower even before this announcement. Long-term fixed-rate mortgage rates are now at about 6.2%, the lowest since February 2023 – so this rate cut may already be priced in. On the other hand, since the Feds have signaled an intent to continue cutting interest rates into next year, some are predicting that mortgage rates may fall as much as another half percent in the coming months. 

• Lower rates could mean higher prices. While lower rates may bring more buyers back to the market, inventory remains slim almost everywhere – so continued competition may keep prices moving upward. Also, many homeowners refinanced their mortgages to take advantage of record-low rates during the pandemic at rates so low that they are less likely to sell and face a higher rate. That remains a problem for first-time homebuyers, especially since there is still a huge shortage of starter homes. 

• Lower rates could lead to more supply. At the same time, the rate cut may make it easier for developers to build more housing supply. It will take some time for these new homes to be ready for occupancy, but more homes coming into the market could relieve some of the demand that has been pushing up prices.

• Affordability will still be problematic. Home prices have risen by about 50 percent since early 2020, faster than average household income growth during that time, which has kept home-buying out of reach for many.  

In view of these factors, it is likely that while the Federal Reserve's 50 basis point rate cut will have some effect on the mortgage market, its exact impact remains unclear. Potential homebuyers should carefully consider their options.  

Waiting for the perfect moment can be risky in an unpredictable market, and it may take more than this rate cut to fix the current housing problems. Savvy agents may do well to suggest to qualified buyers that securing a mortgage now, with rates nearly a full point lower than they were last spring, might be a reasonable choice. 

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This material is meant for general illustration and/or informational purposes only. Although the information has been gathered from sources believed to be reliable, no representation is made as to its accuracy. This material is not intended to be construed as legal, tax or investment advice. You are encouraged to consult your legal, tax or investment professional for specific advice.   

About Bobbi Pronin
Bobbi Pronin is an award-winning writer based in Orange County, Calif. A former news editor with more than 30 years of experience in journalism and corporate communications, she has specialized in real estate topics for over a decade.

Bobbi is not an employee of Anywhere Integrated Services or affiliated with its title companies.