The Fed goes big with first rate cut 

While the odds favored a modest rate cut, the Federal Reserve appears to be taking a more aggressive stance on interest rates, opting for a 50-basis point cut today — and more to come in the next few months. It's the first rate cut since 2020, and real estate agents will soon find out if it's enough to spark a late-season rally.

Not only did the Fed decide to go big, starting with a 50-point cut, but a survey of the Board of Governors is projecting two more 25-point cuts in the coming three months.

"We made a good, strong start with this," Fed Chairman Jerome Powell said in a press conference following the rate announcement. "This decision reflects our growing confidence that with an appropriate recalibration of our policy stance, strength in the labor market can be maintained in a context of moderate growth and inflation moving sustainably down to 2%."

"The economy is in good shape… we want to keep it there," Powell added.

Mortgage rates might hold steady for now

Investors had been split on what the Fed would do, with 40% predicting a 50-point cut. With that sizable minority expecting today's cut, it's possible that 30-year fixed-rate mortgages won't move far from last week's 6.2% average — at least not right away. If two more rate cuts happen before the end of 2024, however, that could be enough to push mortgage rates down.

The more immediate impact will be seen in the construction sector, said Robert Dietz, chief economist at the National Association of Home Builders.

"A reduction for the cost of builder and developer loans is a bullish sign for housing affordability," Dietz said.

If rates do continue to fall, it will bring more buyers and sellers into the market, which could have a normalizing effect, said Lisa Sturtevant, chief economist at Bright MLS.

"An increase in both demand and supply this fall likely will lead to steady home prices in most local markets," Sturtevant said.

It's unclear whether that's enough to boost home sales in the final three months of the year. In its September report, Fannie Mae forecast that existing home sales are not expected to pick up meaningfully for the rest of 2024, putting the annual pace at its lowest point since 1995.

"We expect affordability to remain the primary constraint on housing activity for the foreseeable future," said Doug Duncan, Fannie Mae's chief economist.

But lower rates could create an opportunity for those who don't want to (or can't) wait to buy a home, said Danielle Hale, chief economist at Realtor.com. October can be a "sweet spot" for buyers because prices — and competition — tend to be lower in the fall.

Supply issues 'will have to be dealt with by the market' — and government

After announcing the rate cut, Powell fielded a few questions specific to the housing market. Noting that the housing market is frozen in part due to the lock-in effect of homeowners' existing low rates, he thinks more people will start to move as rates come down.

"But remember, when that happens, you've got a seller… and a buyer in many cases," Powell said. "So it's not obvious how much additional demand that would make."

He added that the housing shortage is the real issue, which will continue to make homebuying challenging. While the Federal Reserve can't fix the supply problem, Powell said normalizing rates will help.

"That's the best thing we can do for householders, and then the supply question will have to be dealt with by the market and also by government," Powell said.