Will Interest Rate Cuts Shift the Real Estate Market?
Two consecutive interest rate reductions in the U.S. have reshaped housing conversations in recent months, signaling potential change across both mainstream and luxury real estate markets.
Market Snapshot
The U.S. real estate sector has been closely watching the Federal Reserve’s recent decisions. On September 17 and October 29, the Fed implemented two separate 0.25% rate cuts, bringing the benchmark rate down to 4.00%. These moves are widely expected to stimulate housing activity and encourage additional new-home construction.
For buyers who have been waiting for market momentum to shift, conditions may finally be turning in their favor.
Fresh data from the Federal Home Loan Mortgage Corporation shows that the average 30-year fixed mortgage rate dropped to 6.35% in September, down from 6.59% in August, offering meaningful savings and increased purchasing power.
These easing borrowing costs are poised to benefit luxury buyers as well. According to the Realtor.com® “Cash Is King” report (published October 7), approximately 60% of home sales above US$1 million were mortgage-financed in the first half of 2025, even as most purchases over US$2 million continued to close in cash.
Additional insight from the “Residential Real Estate Market Snapshot Report,” released by the National Association of REALTORSⓇ (NAR) in September 2025, indicates that buyers across all price ranges may want to re-enter the market as conditions evolve.
Market Indicators
NAR’s latest data reveals 1.53 million homes were available for purchase in August 2025, a slight 1.3% decrease from July, yet still 11.7% higher year-over-year. More supply means improved options and potentially greater negotiating room for buyers.
Home prices are also showing signs of moderation. In its September release of “Existing-Home Sales” data, NAR reported that the median sales price for existing single-family homes reached US$427,800 in August 2025. This represents a 1.9% increase year-over-year, yet reflects a 1% decline from July—a notable softening compared to the rapid appreciation of previous years.
Together, cooling prices and lower mortgage rates present what Dr. Jessica Lautz, NAR’s deputy chief economist and vice president of research, describes as “a sweet spot for savvy buyers.”
She adds that if the downward trend in rates continues, “the target interest rate should have a domino effect into the mortgage market. Rates in the low-6% range should continue in 2026.”
