T
he Federal Reserve took a bold step by cutting interest rates by 50 basis points at its September meeting, signaling that two more cuts are on the way this year. This move is the first rate cut since 2020 and may spark a late-season rally in the real estate market.

    Key takeaways from the Fed's decision include:

    * The target rate has been lowered to the 4.75% range.

    * Mortgage rates, which have fallen recently, may not see significant declines immediately due to being already priced in.

    * Lower interest rates could provide opportunities for buyers who don't want to wait or can't afford to buy a home at current prices.

    Fed Chairman Jerome Powell emphasized that the decision reflects growing confidence in maintaining labor market strength with moderate growth and inflation. He also stated that the economy is in good shape and wants to keep it there.

    The impact of the rate cut will be seen first in the construction sector, as a reduction in builder and developer loan costs can improve housing affordability. If rates continue to fall, it could bring more buyers and sellers into the market, leading to steady home prices in most local markets.

    However, existing home sales are not expected to pick up meaningfully for the rest of 2024, according to Fannie Mae's forecast. Affordability remains the primary constraint on housing activity, but lower rates can create opportunities for those who don't want to wait or can't afford to buy a home at current prices.

    The housing shortage is the real issue that will continue to make homebuying challenging. While the Federal Reserve can't fix the supply problem, normalizing interest rates will help.