What We’re Seeing Now: Rate Cuts Gaining Ground
The markets are pricing in a 25 basis point cut by the Federal Reserve in mid-September 2025.
Many economists expect at least one more cut before year-end. Some even see more cuts stretching into 2026.
Mortgage rates (especially 30-year fixed) have eased, recently falling to 11-month lows — around 6.49% in early September, down substantially from earlier more painful highs.
These trends suggest that the Fed is trying to balance easing financial conditions without igniting inflation anew, especially given that job market indicators appear to be softening.
What Experts Are Saying: Projections & Caveats
Here are some key takeaways from analysts and forecasts:
Mortgage Rates Stay Elevated but May Come Down Gradually
Even with some reduction in the Fed’s policy rate, mortgage rates are not expected to plunge quickly. Factors like the yield curve (especially the middle of the Treasury curve) may not respond fully to Fed cuts.“Lock-in” Effect Remains a Constraint
A lot of homeowners have mortgages from earlier years with much lower interest rates. These people are less likely to sell or move, which suppresses supply. For many new buyers, the still-high rates are a barrier.Affordability Pressure Remains
Even with rate relief, home prices, insurance, taxes, and local market conditions still make housing expensive in many areas. Mortgage rates around 6%+ are helping some but aren’t low enough yet to change the calculus for many potential buyers.Housing Market Growth Will Be Modest
JPMorgan forecasts that U.S. housing market growth will be very subdued through 2025 — less than 3%.
Real Estate Impacts: What to Expect
Here’s how these rate reductions could play out in real estate:
| Area | Likely Effect |
|---|---|
| Home Buying Demand | As mortgage rates fall somewhat, more potential buyers who were sidelined might reenter. We should see an uptick in purchase applications. |
| Refinancing Activity | With falling rates, people with higher-rate mortgages may refinance, though many are locked into rates well below current ones, which limits how many participate. |
| Supply & Listings | Sellers with low locked-in rates have little incentive to list. That keeps inventory tight in many markets, which will moderate downward price pressure. But new supply could increase if builders respond to improved affordability and financing. |
| Home Prices | Probably steady or mildly increasing in many markets. In overheated ones, we might see slowdown or small declines. But a major drop is less likely unless multiple economic headwinds (e.g. job losses, sharp inflation spikes) emerge. |
| Regional Variation | Areas with high demand, limited inventory, or desirable locations will benefit more. Affordability remains much tighter in expensive urban or coastal regions. Some Sun Belt and inland metros may see greater gains. |
What to Watch For / Risk Factors
If inflation doesn’t continue to come down, the Fed may delay cuts or reverse course. That could keep mortgage rates higher for longer.
Labor market performance matters: employment, wage growth, unemployment — these will feed into both inflation expectations and how aggressive the Fed feels it can be.
Global economic shocks (e.g. energy prices, supply chain disruptions) could complicate the picture, pushing rates back upward.
Policy / regulatory changes (tax law, housing subsidies, zoning) could affect real estate supply or demand significantly.
Bottom Line
We’re likely entering a phase of gradual rate relief: not dramatic drops, but enough easing to thaw out parts of the housing market. Buyers may get some breathing room, refinance activity will inch up, and markets with good fundamentals will benefit the most. But affordability issues and tight inventory will still be very real headwinds.