As financial markets intently analyze each economic update for hints about a potential rate cut in September, many are waiting and trying to anticipate the Federal Reserve’s next move. The possibility of a rate cut remains a hot topic. With inflation nearing the 2% target, the Fed’s focus has now shifted to the labor market, which is showing signs of cooling but not as sharply as anticipated. August payroll numbers missed expectations, and July’s data was revised downward. However, wage growth and hours worked in August were stronger than forecasted.
When the Federal Reserve lowers the Federal Funds Rate, it reflects broader economic conditions, and mortgage rates typically react. While a single rate cut may not cause a sharp drop in mortgage rates, it can help support the gradual decline we’re already seeing. Once the Federal Reserve initiates a rate-cutting cycle, we can typically expect mortgage rates to move somewhat lower. And any upcoming rate cut likely won’t be a one-time event. Lawrence Yun, Chief Economist at the National Association of Realtors (NAR), says: “Generally, the rate-cutting cycle is not one-and-done. Six to eight rounds of rate cuts all through 2025 look likely.”
With the Fed weighing a possible 25 or 50 basis point cut, Idaho’s housing market could see notable effects. A rate cut typically leads to lower mortgage rates, which may increase homebuyer activity, driving demand in markets like Boise and Treasure Valley. This could help counterbalance rising home prices and make it more affordable for buyers to enter the market.
Additionally, a cut in interest rates may encourage homeowners to refinance, potentially leading to more inventory. As Idaho continues to experience population growth and a competitive housing market, a rate cut could bring some much-needed relief, particularly for first-time buyers and those seeking to upgrade.
This is encouraging news for both buyers and sellers for two key reasons:
- Easing the Lock-In Effect
Current homeowners could find relief from the “lock-in effect” as mortgage rates decrease. Many feel stuck in their current homes because today’s rates are higher than those they secured when they first purchased their property.
If you’ve been hesitant to sell due to concerns about losing your favorable mortgage rate and facing higher costs, even a small rate drop might make the idea of selling more appealing. However, it’s not expected that a flood of sellers will rush into the market, as some may still be reluctant to part with their existing low rates.
- Encouraging Buyer Activity
For buyers, even a slight drop in mortgage rates makes the housing market more attractive. Lower rates decrease the overall cost of owning a home, potentially making it more feasible for those who have been waiting to enter the market.
So the bottom line remains, while there are still uncertainties, Idaho’s real estate market may benefit from the Fed’s decision in the coming months, with greater affordability and increased buyer activity likely to follow. The anticipated rate cut represents a positive shift for the future of the housing market and it’s important for buyers and sellers to consider their options and evaluate what their immediate goals are. The expected rate cuts are likely to have a positive, though gradual, impact on mortgage rates which could help unlock opportunities for many buyers and sellers.