The Federal Reserve’s decisions are the single biggest driver of sentiment and expectation in the housing market. While the Fed doesn’t set mortgage rates directly, their actions influence the broader economy and, in turn, where rates head next.

We are at a pivotal moment. Here is what you need to know about the expected rate cut and the key economic indicators to watch as we head toward the next meeting.

Key Economic Indicators Signaling a Rate Cut

The Fed’s primary mission is to manage inflation and maintain full employment. When they see both indicators cooling, it makes a rate cut more likely.

  • Inflation is Easing: The good news is that inflation is approaching the Fed’s target rate of 2%. The Fed has been raising rates to slow the economy and bring inflation down, and the recent easing is a crucial signal that their policy is working.
  • Unemployment is Cooling: The unemployment rate has ticked up slightly to 4.3%. While this is still a strong job market, the slight rise indicates a cooling economy; the second major sign the Fed looks for when considering rate cuts.
  • Jobs Report: The latest jobs report showed fewer jobs added than expected, which further supports the narrative of a cooling economy. This makes the anticipated rate cut even more likely.

What the Experts Are Predicting

The consensus among analysts strongly suggests action is imminent:

  • September Cut is Likely: Nearly 80% of economists surveyed by Bloomberg predict the Fed will make a quarter-point rate cut in September. This expected move could set the stage for more cuts down the line.
  • Long-Term Rate Trend: According to the Chief Economist at the Mortgage Bankers Association (MBA), once the Fed begins cutting, we can expect mortgage rates to move somewhat lower. This downward trend has already begun in recent weeks.
  • 2025 Outlook: Lawrence Yun, Chief Economist at NAR, suggests we could see anywhere from 6 to 8 rounds of rate cuts through 2025. This long-term trend has significant positive implications for housing affordability.

How This Impacts Mortgage Rates

This stability and predicted easing create a clearer path for buyers and sellers:

The Fed’s potential rate cut in September might be the first of several, which will contribute to a calmer, more affordable housing market into next year. For you, this means better planning, lower future monthly payments, and a stronger position to guide your clients.

It’s crucial to stay informed and be prepared for these shifts!