Today's Rate Cut Means (Almost) Nothing

by Rob Luck

Today the Federal Reserve meets, and yep: almost everyone expects a rate cut. A 25-basis-point (0.25%) trim in the federal funds rate appears all but baked in. (Financial Times)

But what most people are watching more closely is not just what they’ll cut, but how they talk about future cuts: the signals, the road-map, the “dot plot” projections. Because that’s what’s going to move markets, and yes, housing more than this one cut. (Reuters)

What the Fed is Likely to Do ... And Why It’s Not a Silver Bullet

Likely action: cut by 0.25% (one quarter-point). (Financial Times)
Likely messaging: cautious. The Fed will probably signal more cuts ahead, but tempered by worries about inflation, labor market softness, and economic growth. (AP News)
What it won’t do: plunge overnight rates enough to dramatically ease housing affordability. The truth is, a lot of this cut is already priced in as mortgage rates (and buyer expectations) have already been drifting down over the past several weeks. Markets have anticipated this move, so most of its benefit is already “used up," so to speak. (The Economic Times)

Why Waiting for Rates to Be “Just Right” Might Be a Mistake

Because while rates are inching down, the other shoe is coming: more buyers.

Already, mortgage applications are rising. Lower rates (or expectations of lower rates) tend to trigger “fear of missing out” among buyers. More people who were sidelined begin to re-enter. (Reuters)
If rates drop further (especially if the Fed signals multiple cuts ahead), that could create a burst in demand. More people shopping for homes, more competition and you know what that tends to do: push prices upward.
Also: the supply side doesn’t always respond quickly. Even if builders ramp up, land, labor, regulations mean it’s hard to suddenly flood the market with inventory. So competition matters.

So waiting for that dream rate might cost you more in home price increases than you save in rate drops. It's a risky game to play.

What You Should Do (Even If Conditions Aren’t Perfect)

Lock in what you can If you’re in a position to buy (stable income, good credit, etc.), don’t expect tomorrow to be drastically better. A 0.25% drop today is helpful. Depending on your loan amount, that can mean meaningful savings over the life of the loan.
Watch Fed signals If Powell & Co. hint at several cuts in coming months, those signal markets will anticipate even lower rates, mortgage lenders may loosen conditions (or compete more), and demand will rise. Good to be ready.
Budget for competition Even with softening job data or inflation, housing markets are notoriously sticky. If more buyers show up, you may have to act faster, compromise on some wants, or be ready to pay a little more than your “wishlist budget.”
Don’t stall on parts you can control Clean up credit, get pre-approval, save for down payment or closing costs, survey neighborhoods, get serious about what kind of property you want. Those things cost nothing but time, and time works in your favor when rates or affordability shift.

The Bottom Line

If you're in the market to buy a home now or in the short-term future, get ready now!

Today’s Fed cut - and especially the signals in the statement and projections -matters. But it won’t magically fix housing affordability tomorrow. Much of what can be improved by lower rates has already begun to move, and markets have been sniffing this out for weeks.

Waiting for “just the right rate” is tempting. But if you wait, remember: you might be waiting into higher home prices, fiercer competition, and missed opportunities. So if you can move now, do what you can. When conditions get better—and they might—you’ll be in a much stronger place.