The Federal Reserve announced a third rate cut; fewer are expected in 2025
Published On Dec 19, 2024, 1:33 PM
The Federal Reserve has cut interest rates by a quarter of a percentage point, bringing rates to between 4.25% and 4.5%. This marks the third rate cut this year, with expectations of only two more in 2025. The Fed's decision is aimed at addressing low inflation and maintaining low unemployment. The housing market is anticipated to improve with more listings, although mortgage rates will likely remain high, fluctuating around 6%. Home prices are expected to rise by about 3.7%. Real estate experts suggest that buyers should prepare for a volatile market in 2025, although conditions may gradually improve as mortgage rates stabilize.
Stock Forecasts
XHB
Positive
With the Fed cutting interest rates, we can expect mortgage loans to become slightly more affordable. This could stimulate the housing market and increase buying activity in 2025, especially as economic conditions stabilize and inventory improves. Real estate investments, particularly in ETFs focused on housing or mortgage financing, could benefit from this trend.
DHI
Negative
Despite a slight decrease in interest rates, the continuing high mortgage rates and a volatile housing market could create challenges for potential homebuyers, which might negatively affect homebuilder stocks in the short term. A cautious approach towards investing in real estate sectors is advisable until there are clear signs of stabilization in both rates and home prices.
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