As we enter September, everyone’s talking about the Fed’s next move and what it means for interest rates. The big prediction? A Federal Funds Rate cut is likely, driven by easing inflation and a softer job market.
Mark Zandi, Chief Economist at Moody’s Analytics, even said: “They’re ready to cut, just as long as we don’t get an inflation surprise between now and September, which we won’t.”
But let’s break it down—what does this mean for you if you’re thinking about buying or selling a home in San Diego?
Why Should You Care About a Federal Funds Rate Cut?
Here’s the deal: The Federal Funds Rate is a big player when it comes to mortgage rates. But it’s not the only factor—things like the economy and what’s happening around the world also play a part.
So, when the Fed decides to cut this rate, it’s like sending out a signal about what’s going on with the economy. Mortgage rates usually follow suit. Now, don’t expect a massive drop overnight, but we’re likely to see mortgage rates continue their slow and steady decline. Mike Fratantoni, Chief Economist at the Mortgage Bankers Association (MBA), says: “Once the Fed kicks off a rate-cutting cycle, we do expect that mortgage rates will move somewhat lower.”
And this cut probably isn’t going to be a one-and-done situation. Lawrence Yun, Chief Economist at the National Association of Realtors (NAR), said, “Generally, the rate-cutting cycle is not one-and-done. Six to eight rounds of rate cuts all through 2025 look likely.”
What Does This Mean for Mortgage Rates?
Experts are saying we could see mortgage rates continue to dip through 2025, partly thanks to these expected Fed cuts. With inflation improving and the job market cooling off, it looks like we’re headed for a moderate decrease in mortgage rates.
So, why’s that good news for you?
1. It Could Ease the Lock-In Effect
If you’re already a homeowner, you might know this feeling—being locked into your current place because your mortgage rate is way lower than what’s out there now. It’s a real thing, and it’s kept a lot of people from selling.
But with lower mortgage rates, you might feel a bit more freedom. Sure, it’s not going to make everyone suddenly list their homes, but it might nudge a few folks to take the plunge.
2. It Could Get Buyers Moving
For those of you thinking about buying, lower mortgage rates are like a green light. They make home ownership more affordable, which means you might finally be able to make that move you’ve been dreaming about.
So, What Should You Do Next?
While a Fed rate cut might not send mortgage rates plummeting, it’s definitely helping to keep the trend going in the right direction.
But here’s the thing: Waiting for the “perfect” market conditions can feel like chasing a unicorn. Jacob Channel, Senior Economist at LendingTree, gets it: “Timing the market is basically impossible. If you’re always waiting for perfect market conditions, you’re going to be waiting forever#
When it comes to buying a home, it’s important to remember that market conditions are just one piece of the puzzle. While a potential rate cut might make the idea of buying more appealing, the real question is whether it aligns with your personal and financial situation. Consider your long-term goals, financial stability, and lifestyle needs. Are you ready to commit to a mortgage? Do you have a stable job and emergency savings? If the answer is yes, then buying now could be a smart move, especially with the possibility of lower rates on the horizon. You can always lock in a great deal on a home and refinance in the future. Ultimately, buying a home should be a decision based on what’s best for your unique circumstances, not just what’s happening in the market.
If you are ready to explore your next move, please reach out to us. We are here to help you navigate these changes and make the most of them.
