How does the Fed's rate cut affect home prices?

The Federal Reserve's 50 basis point rate cut has potential homebuyers and sellers wondering what affect it will have on the housing market. It's the Fed's first rate cut since March 2020 and it lowers the benchmark federal funds rate to a range of 4.75% to 5%. Real estate experts expect the rate cut will bring more buyers and sellers to market, potentially increasing the inventory and creating momentum for price competition. LiveNOW's Carel Lajara spoke about the housing market with real estate expert Kirsten Jordan.

null - Mortgage rates jumped markedly this week, sending demand down for a second straight week.

Freddie Mac's latest Primary Mortgage Market Survey, released Thursday, showed that the average rate on the benchmark 30-year fixed mortgage surged to 6.32% from last week's reading of 6.12%. The average rate on a 30-year loan was 7.57% a year ago.

"Following the release of a stronger-than-expected September jobs report, the 30-year fixed rate mortgage saw the largest one-week increase since April," said Sam Khater, Freddie Mac’s chief economist.

HOUSING TURNOVER RATE HITS LOWEST LEVEL IN 30 YEARS

"However, we should remember that the rise in rates is largely due to shifts in expectations and not the underlying economy, which has been strong for most of the year," Khater continued. "Although higher rates make affordability more challenging, it shows the economic strength that should continue to support the recovery of the housing market."

Many would-be buyers and sellers are holding out to see if rates fall further. Currently, about 80% of mortgage holders have a rate below 5%, according to a Zillow survey.

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The average rate on the 15-year fixed mortgage also rose to 5.41% from 5.25% last week. One year ago, the rate on the 15-year fixed note averaged 6.89%.

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