Fed Rate Cuts: The Game Changer for Homebuyers and Sellers?

The annual inflation rate in the US rose to 2.7% in November 2024, up from 2.6% in October. The core inflation rate remained steady at 3.3%. The Federal Reserve is expected to cut interest rates by 25 basis points (0.25%) at its December 18 meeting, which would be the third consecutive rate cut of 2024

Impact on Real Estate Market and Mortgages

Mortgage Rates: While Fed rate cuts don't directly control mortgage rates, they can influence them. Mortgage rates are expected to fall through the end of 2024 and into 2025, potentially dropping below 7%.

1. Home Sales: Lower interest rates could stimulate home sales, which had previously dropped sharply due to higher rates.
2. Home Prices: Despite lower sales volumes, home prices have remained at record levels. Lower interest rates could further support home values.
3. Buyer Sentiment: Falling mortgage rates could bring "welcome relief" to prospective homebuyers and sellers.
4. Long-Term Outlook: While rates are expected to continue declining in 2025, they may remain above 6% for most of the year.

It's important to note that the real estate market's response to rate cuts may be gradual, and other economic factors, such as inflation and employment data, will also play a role in shaping the housing market landscape.