What the Fed’s Rate Cutting Plans Mean for the Housing Market
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On Wednesday, the Federal Reserve announced a 50-basis-point cut to the federal funds rate, while projecting a comparable reduction through the rest of the year. (A basis point is one one-hundredth of one percent.) That was roughly what markets had priced in. Mortgage lenders have also already baked that assumption into mortgage interest rates: Since peaking over 7% in spring, rates have fallen more than a full percentage point. If lower mortgage interest rates are finally here, what does that portend for potential home buyers, refinancers and sellers?
Buyers' wait is over
Generally, when rates fall, buyer demand rises — but that didn't happen as mortgage rates dropped this summer, according to Chen Zhao, head of economic research at Redfin. She speculates this Federal Reserve announcement will bring more buyers to the market. "They're waiting to see the Fed take action, not realizing that this gets priced in early."
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