T
he Federal Reserve cut short‑term rates by 25 basis points on Dec. 10, the third consecutive cut this year, moving the policy rate to 3.5‑3.75%. The vote was 9‑3, the first time in six years that three officials dissented. The Fed’s updated projections now show little expectation of further cuts, with a split view on whether rates will stay at 3.5% or fall to 3‑3.5% in 2026.

    Fed Chair Jerome Powell said the housing market faces structural shortages and that the recent cut will not dramatically ease the situation. He noted that ultra‑low mortgage rates from the pandemic era are discouraging moves because current rates are higher, and that the Fed lacks tools to solve the supply problem. Inflation remains above the 2% target, but the early‑year tariffs appear to have temporarily lifted prices, and core inflation is cooling. The job market’s softness is now a bigger concern; the Fed plans to monitor whether the three cuts are enough to relieve labor‑market strain.

    30‑year fixed‑rate mortgages have slipped to an average of 6.19% last week, but the Fed’s decision to pause may keep rates steady or push them higher. Lisa Sturtevant, chief economist at Bright MLS, warns that mortgage rates could rise through the year as the Fed’s stance remains divided. Melissa Cohn of William Raveis Mortgage notes that new data on labor and inflation, released after the government shutdown, could shift expectations.

    Affordability should improve if incomes keep rising and home‑price growth stays modest. Danielle Hale, chief economist at Realtor.com, projects that buyers will spend about 29.3% of their monthly income on a median‑priced home, the first time this share has fallen below 30% since 2022. She expects home sales to climb in 2026 from 30‑year lows.

    Ruben Gonzalez of Keller Williams adds that the weakening job market may temper demand for existing homes, but he sees 2026 as a transition year with modest sales growth amid high inventory.