W
hile a rate cut by the Federal Reserve could boost homebuyers, other factors will influence the real estate market in the final months of 2024. The Fed is expected to announce its first interest rate cut in four years on September 18, with options ranging from a 25 basis-point reduction to a more aggressive 50 basis-point cut.

    Market expectations have already driven 30-year mortgage rates down to nearly 6%, their lowest level in a year. However, lower mortgage rates don't necessarily translate to a home sales rally, as the selling season winds down and buyers face high home prices.

    Analysts are divided on whether the Fed will opt for a smaller or more aggressive rate cut. Sam Williamson, First American senior economist, believes the Fed will choose a 25 basis-point reduction, citing recent economic data that hasn't shown further deterioration. Mortgage News Daily estimates 30-year fixed rates were at 6.11% on September 17, down nearly half a percentage point from a month ago.

    The outcome of the Fed meeting is uncertain, and traders are bracing for volatility. Matthew Graham, chief operating officer at Mortgage News Daily, notes that this will be the first Fed meeting in a long time with an even split in forecasted outcomes.

    Even if mortgage rates decline further, there's no guarantee home sales will bounce back in the final quarter of 2024. In Canada, where the central bank started cutting rates in June, home sales were down 2.1% in August compared to a year ago. Seasonality is also a factor, as inventory and buyer demand tend to wind down in the fall.

    While lower mortgage rates will help with affordability, home prices remain high. Redfin reported that U.S. home prices rose 0.5% in August, the biggest month-to-month increase since April. There might be more buyers looking, but as fewer new listings hit the market, any mortgage relief could be offset by higher prices.

    Despite these headwinds, a rally in home sales isn't out of the question. A small rally occurred at the end of 2022 as interest rates declined, indicating that consumers do react to rate movements. Mortgage services may see a boost this fall if rates decline further, with about 4 million homes potentially ripe for refinancing at current rates.