Federal Reserve Cuts Interest Rates by a Quarter Point: Experts Weigh In on Impact on Housing Market
The Federal Reserve has made its second consecutive interest rate cut, reducing the rate by a quarter point. Nadia Stanley, Financial Services Professional & Agent with NY Life Securities, joins LiveNOW from FOX to discuss the implications of this move on the housing market.
Loan Limits for Mortgages Increase by 5.2% in 2025
The Federal Housing Finance Agency (FHFA) has announced that it will be raising the loan amount limits for mortgages purchased by Freddie Mac and Fannie Mae by 5.2% in 2025. This increase is intended to reflect changes in the average home price, which has risen 5.21% from the third quarter of 2023 to the same quarter this year.
The new conforming loan limit value for a one-unit home will be $806,500 next year, an increase of nearly $40,000 from the 2024 baseline cap. However, in high-cost areas of the country where 115% of the local median home value exceeds the baseline loan limit, the loan ceiling is 150% higher. This means that the loan cap for a single-unit home in those areas will be $1,209,750, which is 150% of $806,500, FHFA said.
Americans Need Six-Figure Salaries to Afford a House in Most Cities
The housing market is facing a sustained affordability crisis, with home prices surging in recent years, along with mortgage rates. According to a new economic report, Americans need six-figure salaries to afford a house in most cities. This is due in part to the fact that higher prices are coupled with persistently elevated mortgage rates and adjusted for inflation. A typical mortgage payment, only including principal and interest, is now 82% higher than pre-pandemic, according to CoreLogic chief economist Selma Hepp.
Home Prices Reach 16th Consecutive All-Time High
The S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index reported that home prices hit their 16th consecutive all-time high in September and now sit 51% higher than at the start of the pandemic. This trend is expected to continue, with home prices expected to rise further in the coming months.
Experts Weigh In on the Impact of Higher Mortgage Rates
Higher mortgage rates are causing a significant increase in the cost of homeownership. According to Hepp, "When higher prices are coupled with persistently elevated mortgage rates and adjusted for inflation, a typical mortgage payment, only including principal and interest, is now 82% higher than pre-pandemic." This means that many potential homebuyers are being priced out of the market, leading to a sustained affordability crisis in housing.
What’s Next for the Housing Market?
The Federal Reserve’s interest rate cut is expected to have a positive impact on the housing market, with many experts predicting that it will lead to lower mortgage rates and increased affordability. However, the overall outlook for the housing market remains uncertain, with many factors at play, including rising prices, inflated mortgage rates, and supply chain issues.
Frequently Asked Questions
Q: What is the new conforming loan limit value for a one-unit home in 2025?
A: The new conforming loan limit value for a one-unit home will be $806,500 next year.
Q: What is the loan ceiling for single-unit homes in high-cost areas?
A: The loan ceiling for single-unit homes in high-cost areas will be $1,209,750, which is 150% of $806,500.
Q: What is the average rate on the benchmark 30-year fixed mortgage?
A: The average rate on the benchmark 30-year fixed mortgage is currently 6.84%.
Q: What is the current state of the housing market?
A: The housing market is facing a sustained affordability crisis, with home prices surging in recent years, along with mortgage rates.
