Myth Busted: Fed Rate Cuts & Housing Prices
Have you heard that a Federal Reserve rate cut will make home prices skyrocket? It’s a very common misconception! Many believe that when the Fed cuts rates, mortgage rates automatically drop, making homes more affordable and pushing prices up. But the truth is a little more complex!
While it sounds logical, the reality is there’s no direct link between the Fed’s overnight lending rate and housing prices. Take 2022 for example— the Fed slashed rates to zero, yet home price growth didn’t heat up until 2021!
Here’s what actually drives housing prices : Mortgage rates (primarily tied to the 10-year U.S. Treasury yield, not the Fed’s overnight rate). Market supply and demand Local economic factors .
So next time you hear someone claim that a Fed rate cut will send home prices soaring, you’ll know the real story!