Right now, everyone’s watching the Federal Reserve. Most economists predict they’ll cut the Federal Funds Rate during their mid-September meeting in an effort to prevent a potential recession.
According to the CME FedWatch Tool, markets are already pricing this in, with nearly a 100% chance of a September cut. Current expectations show about a 92% likelihood of a modest 25-basis-point cut, and an 8% chance of a larger 50-point cut.
Why This Matters for Homebuyers and Sellers
The Federal Funds Rate isn’t the same as mortgage rates—it’s the short-term interest rate banks charge each other. But Fed policy heavily influences the direction mortgage rates take.
Mortgage rates often move ahead of the Fed’s official announcement. After weaker-than-expected jobs reports in August and early September, rates already inched lower as markets grew confident a cut was on the way. Even with inflation ticking slightly higher in the latest CPI data, the Fed is still expected to move forward.
If the cut ends up being just 25 basis points, it’s likely already factored into current mortgage rates. But if the Fed surprises with a 50-point cut, we could see a bigger drop in borrowing costs.
What Could Happen Next
Many experts believe the Fed may not stop with one cut. If the economy keeps cooling, we could see additional reductions before the end of 2025. That could bring more affordability to buyers in Tacoma, Puyallup, Auburn, Sumner, SeaTac, Des Moines, Burien, Normandy Park, Lake Tapps, and Bonney Lake—markets where demand often shifts quickly when mortgage rates change.
As Sam Williamson, Senior Economist at First American, explains:
“For mortgage rates, investor confidence in a forthcoming rate-cutting cycle could help push borrowing costs lower in the back half of 2025, offering some relief to housing affordability and potentially helping to boost buyer demand and overall market activity.”
The Bottom Line
While no one can predict the economy with certainty, the Fed’s decisions this fall could set the stage for lower borrowing costs. That means more opportunities for both buyers and sellers in the months ahead.
For expert guidance on navigating today’s shifting market, check out my local real estate insights to make confident decisions for your next move.
