An article originally published for Inman, a real estate news company, received opinions from economists and agents on how the 2nd rate cut of the year would impact the housing market.
Original article by Inman
On Wednesday, September 18, the U.S. Federal Reserve announced it would cut interest rates for the second time this year. Interest rates have not dropped since the 2008 recession, so how does the 2nd drop this year affect the housing market and mortgage rates?
**Want to read more about the current Fed interest rates and why they change? Click here **
In a nutshell, Real estate economists have differing opinions on the immediate impact it will have on mortgage rates and the housing market. The Fed is cutting interest rates 25 basis points from between 2 percent and 2.25 percent to between 1.75 percent and 2 percent.
Ruben Gonzalez, the chief economist at Keller Williams told Inman that market anticipation of the Fed’s actions has already impacted long-term rates, which does influence mortgage rates. However, unless there’s uncertainty surrounding Fed policy decisions, the market doesn’t usually see a lot of movement in mortgage rates as a direct result of Fed announcements.
“Trends in mortgage rates right now are being driven primarily by impact of trade policy and global economic pessimism on long-term treasuries,” Gonzalez said. “Recently, we have seen some stabilization of treasuries, and mortgage rates have risen slightly. However, without some genuine resolution to geopolitical tensions around trade, mortgages rates are likely to remain low for the remainder of the year.”
In contrast, Martin Eiden, an associate real estate broker at Compass, doesn’t believe the decision will help buyers and the housing market.
“While affordability of cheap money helps buyers, the main factors they use in deciding to buy are: the stability of the current economy and an optimistic outlook on the future,” Eiden said. “Neither is happening at the moment. A rate cut will not cure the disease caused by the administration but rather be a temporary treatment at best.”
Next, read our blog post about the 4 Reasons Buyers need to purchase now