‘The fever has broken’: Action steps for agents after rate cuts
The recent decision by the Federal Reserve to cut the fed funds rate for the first time in over four years has significant implications for the real estate industry. Historically, a lowering of the fed funds rate has been beneficial for real estate, influencing mortgage rates, buyer and seller psychology, and potentially increasing the inventory of homes for sale.
Inman Connect New York
Inman Connect New York, scheduled for January 22-24, 2025, aims to equip real estate professionals with the tools and strategies needed to navigate the evolving market. The event will focus on refining business models, mastering new technologies, and capitalizing on market opportunities.
Impact of Fed Rate Cuts
David Childers from Keeping Current Matters explains that while the Federal Reserve does not directly control mortgage rates, its policies can influence them. The recent 50 basis point cut in the fed funds rate was anticipated and largely factored into mortgage rates beforehand. This policy change signals a new direction of rate cuts, though volatility in rates is expected as the policy is implemented.
Childers likens the situation to recovering from an illness: the fever breaking is a positive sign, but challenges remain. Future rate cuts are anticipated, with economists predicting up to six more cuts in 2025. The 10-year treasury yield is a key indicator to watch, as it has a historical relationship with mortgage rates.
Market Dynamics and Inventory
The spread between the 10-year treasury yield and the 30-year fixed mortgage rate, which has averaged 1.75 percent over the past 50 years, swelled to 2.761 percent in early 2023. This spread, a measure of market fear, has been NARrowing, which could bode well for mortgage rates.
Lower mortgage rates could unlock inventory from sellers who currently hold low-rate mortgages. A Bankrate survey found that 35 percent of homeowners would consider selling if rates drop below 6 percent. This could address the inventory shortage and increase transactions.
Strategies for Real Estate Agents
Agents can leverage these market changes to create opportunities. Four strategies include:
- Using social media posts to explain the impact of mortgage rates on monthly payments.
- Sending engagement emails to their database to demonstrate industry knowledge and encourage prospective buyers to identify themselves.
- Creating Instagram green screen videos to discuss market trends and offer guides to potential sellers.
- Utilizing Instagram polls to increase engagement and identify potential listings and buyer opportunities.
By becoming a resource for information and professionalism, agents can grow their business in this evolving market environment.
Conclusion
While the real estate market is not yet fully recovered, the shift towards rate cuts presents opportunities. Agents who effectively communicate these changes and provide valuable insights to their clients can thrive. The Inman Connect New York event will further prepare agents to lead in this new chapter of real estate.
