The Federal Reserve's recent decision to lower its key interest rate by 0.5 percentage points, two months before a presidential election, is expected to have a significant impact on the local housing market. The federal funds rate now stands at approximately 4.8%, its lowest level since March 2023. The rate cut aims to cushion the economy from a further slowdown, as job gains have slowed and inflation has neared the Fed’s 2% goal.

Local real estate experts anticipate a positive shift in the housing market as a result of this decision. “Mortgage rates have already been trending down the last few months in anticipation of a rate cut by the Fed,” said Jess Edwards, a representative of Kinston Realty Group. Although mortgage rates are not directly affected by Fed rate cuts, Edwards expects the downward trend to continue.

“Two weeks ago, the 30-year conventional mortgage rate was around 6.3%. Last week it was 6.1%, and we anticipate that rates will continue to move down from the low sixes to the high fives in the near future,” Edwards added. This projection could bring relief to potential homebuyers in eastern North Carolina, as lower mortgage rates would make home loans more affordable.

The Fed's decision was influenced by moderating inflation and a weakening labor market. Despite recent economic challenges, Federal Reserve Chair Jerome Powell expressed confidence in the economy’s stability, stating that the intention is to maintain price stability without significantly increasing unemployment. The central bank expects further rate cuts at its final two meetings of the year.

“It’s tough to imagine this not having a positive impacts on the housing market,” said Brooks Poole, of Walter Poole Realty.

Eastern North Carolina’s housing market could see increased activity as potential buyers take advantage of the anticipated decrease in mortgage rates. This trend could help offset recent declines in discretionary spending, such as restaurant visits, which have been weaker. However, the overall economic outlook remains mixed, with ongoing concerns about inflation and potential impacts on employment.

“Many buyers dreams have become unaffordable recently,” said Poole. “As they come back to test the waters, small percentages of them will step back in the market as the mortgage rates begin to reflect the most recent decrease by the Federal Reserve and the further decreases to follow.”

Edwards emphasized the potential benefits of the Fed’s decision for the local real estate market.

“As economic conditions continue to improve, we are hopeful that more families in our area will be able to secure loans and achieve their dream of homeownership,” Edwards said.

The rate cut marks the first of its size outside of emergency reductions since the 2008 global financial crisis. It is a response to the complex economic environment, where the Fed seeks to balance growth with controlling inflation.

With the Federal Reserve making the cut two months before a presidential election and projections indicating additional rate cuts by the end of 2025, the long-term outlook for interest rates remains a focal point. State Representative Chris Humphrey said, “I'm not sure a rate reduction will mean a great deal to either political party. There is still a housing shortage and inflation has driven up the cost of housing, as well as the cost of most everything Americans purchase on a daily basis.”

For now, local experts like Edwards and Poole remain optimistic about the potential for positive outcomes in the regional housing market, driven by more favorable borrowing conditions.

“This rate cut, combined with a steady decline in mortgage rates, could be a game changer for many in our community looking to buy a home,” Edwards concluded.