Rates Are Falling… But the Story Isn’t That Simple

The Big Story

Quick Take:

Mortgage rates continue to slowly move downwards, as the Federal Reserve continues its rate cuts.
Inventories remain high, as new supply is hitting the market faster than existing homes are being sold.
Last Wednesday, the Fed lowered the federal funds rate by another 25 basis points, bringing the target range to 3.50%-3.75%

As we settle into the new year, many people are asking the same question:
If rates are coming down, why does everything still feel expensive?

Here’s what the latest data shows—and why it matters in the months ahead.

📉 Rates Are Declining, but Still Above Inflation

Mortgage rates have eased from recent highs, but they remain above the inflation rate, continuing to impact affordability.

Even after the Fed’s third consecutive quarter-point cut in December, mortgage rates have not yet fallen below 6%.

Looking ahead:

The next Fed decision is about six weeks away
Current projections show roughly a 25% chance of another cut in January
Additional or delayed economic data could quickly shift expectations

Because the federal funds rate plays a major role in mortgage rates, the Fed’s next move remains critical.

🏘️ Inventory Has Been Steadier Than Expected

Despite higher borrowing costs, inventory has remained relatively stable nationwide:

Inventory has hovered near 1.5 million homes for much of the year
October inventory reached ~1,520,000 homes, up 10.95% year-over-year
Over 384,000 new listings hit the market in October
Median home prices rose 2.06% to $415,200

This balance between steady inventory and modest price growth has helped prevent major market swings.

⚖️ Rate Cuts Continue Amid Economic Uncertainty

Recent government shutdowns delayed key economic data, forcing the Fed to make decisions with incomplete information. While December’s rate cut offered some relief, it’s still unclear whether this cutting cycle will continue or pause once more data is released.

💡 What This Means Right Now

Buyers should expect gradual change, not immediate relief
Sellers continue to benefit from steady prices and consistent demand
Homeowners watching rates should pay close attention to upcoming Fed decisions, as they may shape the rest of the year

The market isn’t moving quickly—but it is shifting.

📍 Remember: Real Estate Is Local

National trends set the backdrop, but real estate decisions are driven by local conditions. Inventory, pricing, and buyer activity can vary widely by neighborhood, making local insight essential when evaluating timing and opportunity.

Understanding what’s happening in your specific market helps put these broader trends into perspective.