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A highly anticipated move by the Federal Reserve to cut its benchmark interest rate this week could jump-start a sluggish housing market in three major ways, experts say.
Because mortgage markets move based on the stated direction of the Fed’s interest-rate policy rather than after a rate change actually occurs, the 30-year mortgage rate has dropped by nearly 100 basis points over the last year, according to recent data from Freddie Mac. The 30-year rate is now at its lowest level in 19 months.
That drop in rates could serve as a jolt that wakes up the sleepy housing market. Home sales have been running slower than usual as high mortgage rates and record-high home prices have shut buyers out. “Home sales are still sluggish,” Lawrence Yun, chief economist at the National Association of REALTORS®, said in a statement about July’s existing-home sales activity.