What’s Really Happening with Interest Rates and Housing

The Federal Reserve recently lowered interest rates by a quarter of a point. While this was big news in the financial world, it’s important to understand what it really means for the housing market. A common misconception is that when the Fed reduces rates, mortgage rates will automatically come down. In reality, that isn’t always the case.

Here’s why: mortgage lenders usually anticipate the Fed’s moves and adjust their rates ahead of time. That’s exactly what happened this time. Mortgage rates had already dipped before the Fed made its announcement. Then, when inflation numbers came in higher than expected, it rattled the economy, and mortgage rates actually rose again. In recent weeks, we’ve seen rates fluctuate – rising, falling, and then rising again – making it feel like a rollercoaster ride for anyone watching closely.

This uncertainty has created a very dynamic housing market. On the one hand, some homes are still receiving multiple offers, but these situations are happening less frequently. On the other hand, more homes are sitting on the market longer, and we’re even seeing buyers successfully negotiate contingencies into their contracts again – something that wasn’t very common during the ultra-competitive years of 2020–2022.

The pace of sales is another concern. August sales were the lowest we’ve seen in three decades. If the slowdown continues, total home sales for the year could fall back to levels not seen since the 1990s. That’s a significant shift and something we’ll be watching closely.

If you’re considering selling, it’s essential to understand what today’s buyers expect. Homes need to be priced competitively, as overpricing will only cause them to sit on the market. Presentation is equally important – buyers want to see properties that are fresh, clean, and move-in ready. Staging can also make a big difference by highlighting a home’s best features and creating a strong first impression. Finally, accessibility matters; the easier it is for buyers to view your home, the better your chances of receiving an offer.

For buyers, the current market offers some unique opportunities. With homes staying on the market longer, there’s more room to negotiate terms, include contingencies, and take a little extra time to make thoughtful decisions, something we haven’t seen much of in the fast-paced markets of the past few years.

Adding to the uncertainty, the federal government shutdown began on October 1st. Right now, no one knows how long it will last. A short shutdown may not have a significant impact, but if it drags on, it could slow down certain aspects of the real estate process – such as mortgage underwriting, flood insurance, and even some verifications tied to government agencies. This could create delays for both buyers and sellers.

The real estate market is adjusting, and while we haven’t quite found our new “normal,” one thing remains true: preparation and strategy matter. Whether you’re buying or selling, the best advantage you can have is knowledge and guidance.

If you’re considering making a move, let’s talk. I’d be happy to walk you through what’s happening right now, explain how it impacts your situation, and outline the steps you can take to achieve your goals. Give me a call, I’m here to help you navigate this market with confidence.