R
eal estate agents have been bracing for nearly three years of high mortgage rates, which have stifled sales, drained inventory, and driven home prices to record highs. So when the Federal Reserve surprised everyone by cutting rates by 50 basis points instead of the expected 25, the reaction was lukewarm.

    In conversations with HousingWire, agents from across the country said they don't expect the larger-than-expected rate cut to have a significant impact on the housing market. They believe lower mortgage rates have already been factored into the market and that any movement will be limited to buyers who need to move rather than those who want to.

    While sales may rise, there's a possibility that an influx of buyers could drive prices up, offsetting the benefits of lower mortgage rates. "Demand comes before supply in this situation," said Redfin agent Justin Vold. "If more buyers come in than supply comes in, it has to dictate stronger prices or more sales."

    Existing-home sales have been sluggish, with a 2.5% month-over-month decline and a 4.2% year-over-year drop reported by the National Association of Realtors. New-home sales are faring better but make up a smaller portion of the market.

    The Fed's rate hikes were initially aimed at combating post-pandemic inflation, which peaked in early 2022. However, inflation numbers have been steadily declining and appear to have bottomed out. The Consumer Price Index (CPI) showed a 2.5% year-over-year rise in August, the lowest figure since February 2021.

    Despite this, housing costs remain stubbornly high, accounting for a third of the CPI. This has led some agents to believe that the Fed bungled its timing on rate hikes and cuts. "The Fed was slow to respond," said Compass agent Leonard Steinberg. "But we're heading back to normal, which will be good for the housing market."

    Mortgage rates need to drop below 5% for the market to truly gain momentum, according to agents. Geographically, the impact of lower mortgage rates will vary depending on local conditions. In areas like Florida and Texas, where markets have cooled, lower rates could stabilize the market.

    However, in hot seller's markets like greater Boston, lower rates may exacerbate affordability issues. "It'll just add more fuel to the fire here," said Linda O'Koniewski, an agent in Massachusetts. Lower rates can also impact the luxury market, which is often seen as immune to mortgage rates.