The Federal Reserve recently cut interest rates by a half-point, from 5.3 percent to 4.38 percent, which is the first rate cut since 2020, and the largest rate cut in 16 years.
But what, exactly, does that mean for the housing market?
A recent article from realtor.com shared the predictions of their senior economist, Ralph McLaughlin, on how the recent rate cut will impact the real estate market, including:
- Mortgage rates will drop. McLaughlin predicts that the Fed’s rate cut will also lead to a drop in mortgage interest rates, although not by a huge amount. “Rates could bottom out between 6% to 6.2% throughout the rest of the year and into the high 5% by next spring,” McLaughlin said in the article.
- More buyers will hit the market — but not quite yet. While some buyers may be tempted to make a move following the rate cut, McLaughlin makes the point that fall is not a hugely popular time to look for a home, and many buyers will likely wait until 2025 to see if rates drop even further.
- More homeowners will refinance. While McLaughlin predicts that the rush of home buyers won’t hit the market until next year, he does predict a near-immediate increase in homeowners refinancing their mortgages following the rate cut, especially owners that bought their homes when interest rates were highest.