Real Estate Set to Rebound: Fed Interest Rate Cuts Pave the Way

On September 18, 2024, the Federal Reserve cut interest rates for the first time since March 2020. This decision makes borrowing more affordable, which is good news for the real estate industry, as it heavily relies on financing for home purchases.

While a rate cut has been anticipated for the past few months, many analysts expected a reduction of only a quarter of a percentage point. Therefore, it was somewhat surprising to see the Fed lower rates by half a point. More cuts may follow as we approach the end of 2024 and look ahead to 2025.

So, what does this mean for homebuyers, home sellers, and real estate professionals? Let’s break it down.

What the Interest Rate Cut Means for Homebuyers and Sellers

Rate cuts directly impact the housing market because mortgage lenders use the federal funds rate to guide their decisions on the loan rates they offer to homebuyers. When the Fed cuts rates, lenders tend to follow suit. In fact, many lenders had already begun lowering mortgage rates in anticipation of the Fed’s reduction.

With lower mortgage interest rates, it costs buyers less to finance a home purchase, improving their buying power. They know they can spend more on a home because less of their monthly mortgage payment will go toward interest. With mortgage rate declines making headlines, more buyers may feel encouraged to start their home searches.

So how does this affect home sellers? Increased buyer demand typically leads to more competition among buyers, which can drive up home prices. Homeowners who have been undecided about selling may now feel that it’s the right time to list their homes for sale.

What the Interest Rate Cut Means for Real Estate Agents and Brokers

For real estate agents and brokers, lower interest rates often lead to an increase in buyer and seller activity. However, it may take a few months before the full effect of the rate cut is seen. Traditionally, the August/September back-to-school season triggers a period of slower sales that lasts through the winter. But with the Fed’s big news, the seasonal slowdown in the housing market may not be as pronounced this year.

How the Fed's Rate Cut Can Boost Your Real Estate Success

If you’re a licensed agent or broker, you should notify all your clients and prospects about the rate decrease. There are many ways to spread the word. For example, you can:

• Personally call or text those who are likely to act on this news.

• Create social media posts to educate your followers about what the rate cut means for the market.

• Go live on social media to explain the news in a more personal way.

• Dedicate a section of your newsletter to this topic.

• Reach out to previous clients to see if they—or their friends and family—want to take advantage of today’s lower interest rates.

If you’re not currently licensed, this might be your sign that it’s time to join the industry. You have four or five months before the busy buying and selling season begins, which is enough time to complete your real estate course and get your license.

Take Action Today to Set Yourself Up for Future Success

Whether you’re an agent, broker, or someone considering a career in real estate, you have a window of opportunity to leverage the Fed’s rate cut to your advantage.

Take action by communicating with your potential clients and those in your network about what this change means for the housing market in general—and for them specifically. If you’ve been on the sidelines, wondering what it would be like to enter the real estate industry, now is your chance to get your license and join our dynamic field.

Making the right move now can position you for success in the months and years to come!