Reply to Will DC housing prices rise if/when Fed cuts rates in September?

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Reply to "Will DC housing prices rise if/when Fed cuts rates in September?"

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[quote=Anonymous][quote=Anonymous][quote=Anonymous]Yes. Housing prices will go up when rates are cut. This has been historically true. [/quote]

Source?  It's likely true that prices go up when mortgages rates decrease (more purchasing power for buyers).  But it's a big leap from fed interest rate cuts (of short term rates) to lower mortgage rates.  "Historically", the yield curve typically slopes upwards (long-term rates are higher than short term rates).  So if the short-term rate is cut by the fed 3-4 times, to 4.25%, "historically" longer term rates (the 10 year) would be marginally higher.  The 10 year is currently at 4.25%.  What is your argument for how short-term rate cuts lead to lower long term rates?  If you don't have one, then don't argue that mortgage rates, which are keyed off of the 10 year, are going down.[/quote]

There are reasons to believe that Fed rate cuts could still lead to higher home prices. While it's true that mortgage rates are more closely tied to long-term yields like the 10-year Treasury, Fed rate cuts can indirectly influence these longer-term rates through market expectations and economic conditions. Lower rates typically boost economic activity and inflation expectations. This can affect the entire yield curve, potentially bringing down longer-term rates as well. Even if mortgage rates don't decrease significantly, the overall lower interest rate environment can stimulate demand in the housing market by improving consumer confidence and increasing investment in real estate as an alternative to lower-yielding assets. Coupled with potentially easier access to credit, this could put upward pressure on home prices even if mortgage rates don't fall dramatically.[/quote]

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