The Federal Reserve cut interest rates on Wednesday for the second time this year, bringing them below 4% for the first time since 2022.
That decision alone would be significant in any environment, but this one comes at a time when the Fed is effectively flying blind. Because of the ongoing government shutdown, official data on inflation, job growth, and consumer spending haven’t been available for weeks. In the absence of those numbers, the Fed had to rely on alternative indicators, market surveys, and its own forward-looking judgment.
Chair Jerome Powell described the moment as a “challenging situation,” with no risk-free path forward. Inflation has cooled, but the labor market is showing strain. Some policymakers pushed for a deeper cut, while others wanted to hold rates steady. The quarter-point reduction that ultimately passed shows both caution and conviction, a signal that the Fed sees real risks in letting the labor market weaken further.
Of significance, while the Fed moved and lowered, the bond market did not respond positively to the cut, and MBS yields rose vs dropping after the cut, resulting in lenders repricing post-Powell’s post-cut narrative.
What This Means for Housing
For those of us in the housing industry, the implications are clear. The Fed’s move isn’t just about the cost of money; it’s about confidence. When rates begin to ease, even if it is the perception of lower rates, consumer psychology shifts, and so does hesitation.
Mortgage rates have been slowly adjusting in line with expectations of a policy shift, and this formal cut reinforces that trend. As Treasury yields and mortgage-backed securities respond, we’re already seeing early signs of improved affordability and renewed buyer interest in some markets.
But beyond the numbers, this is about sentiment. Buyers who’ve been sitting on the sidelines now have a new reason to take another look. Homeowners who locked in higher rates over the past two years are starting to run the math again. Even a modest change can reignite conversations about refinancing, upgrading, or making that long-delayed move.
A Moment for Realtors to Reconnect
For realtors, this is a clear window to act. Every rate cut shifts the conversation from “someday” to “maybe now.”
If you’ve been keeping a list of clients waiting for the right time, now’s the moment to reach out. The buyers who paused in 2023 and early 2024, citing affordability or timing, are watching the news today. They don’t need a sales pitch; they need perspective.
Share what this rate cut means for your local market. Talk about how even a small move in rates can possibly change monthly payments and open new price points. Collaborate with your DRMC partners to host quick Q&A sessions, social posts, or short videos breaking down what this shift could mean for buyers and sellers in your area.
The agents who help clients make sense of today’s news will be the first ones those clients call when they’re ready to act.
What Happens Next
Chair Powell was clear that another cut in December isn’t guaranteed. But even this step signals a shift in the broader conversation. The Fed is no longer holding the line at “higher for longer.” They’re watching closely for signs of a slowdown and are willing to act.
That’s good news for housing. Momentum in our industry rarely moves overnight, but sentiment does. And sentiment is the spark that sets everything else in motion.
Now is the time to be visible, reachable, and ready to have the right conversations. Because for the first time in a while, the wind might be at our backs again.
