The Federal Reserve just announced a third rate cut. A smaller number is expected in 2025

the The Federal Reserve has just cut interest rates Again this year. At its last meeting, the Fed decided to cut interest rates by a quarter of a percentage point, bringing interest rates down to 4.25% to 4.5%. The move was largely expected by economists.

The Federal Reserve cited signs of an expanding economy and an easing labor market after its further interest rate cuts. This is the third time interest rates have been cut this year, but economists do not expect the same cuts in 2025.

“The average member now expects that there will be only two cuts in 2025 and that the federal funds target will be 3% over the long term,” Mike Fratantoni, senior vice president and chief economist at MBA, said in a statement. “MBA expects the federal funds rate to fall to just 3.75% this cycle.”

The unemployment rate also remains low, and inflation is making slow but steady progress toward the committee’s 2% target, both factors that created a bottleneck in the eventual decision to cut interest rates.

“While the unemployment rate has risen over the past year and inflation has trended downward, inflation has stabilized in recent months,” Fratantoni said. “It was not surprising to see opposition at this meeting, with one member voting to keep interest rates steady.”

With the recent interest rate cut, the Fed hopes to get closer to inflation growth and ease the unemployment rate.

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Inflation sees its lowest annual rise since 2021

Home sales are likely to rise in 2025

The housing market has faced continued volatility for a year, but some aspects are expected to drive home sales in 2025. Experts expect a slow thaw in mortgage ratesgiving potential buyers who have been priced out of the market in recent years more room to maneuver.

Many housing market metrics are trending closer to historical norms, showing signs of an improving market in the new year. Listings are still lower than before the pandemic, but much more than in March, when there was a 25% shortfall. According to Zillow.

However, buyers should not expect a completely smooth path when buying in 2025. For many, 2025 looks eerily similar to the volatile market of 2024.

“There’s a strong sense that we’ve seen it happen before in 2025,” said Skyler Olsen, chief economist at Zillow. “We again expect mortgage rates to gradually improve, and opportunities for buyers should follow, but be prepared for a lot of bumps on this Path”. .

Shoppers looking to move in the slower winter months have an advantage. Sellers who have been waiting for interest rates to fall may be looking to unload their homes while interest rates are falling.

“Those who are shopping this winter have plenty of time to choose and a relatively strong position in negotiations,” Olsen said.

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The United States added 818,000 fewer jobs this year than originally expected

Mortgage rates and home prices are expected to fluctuate over the next year

There may be more listings on the horizon, but buyers shouldn’t expect mortgage rates to drop anytime soon. Prices are also not ready to go down yet. Prices are expected to rise by 3.7%. Realtor.com recently reported.

Mortgage rates are also expected to remain in the 6% range, with fluctuations throughout the year, just like in 2024. Because of these small improvements, single-family home listings are expected to grow by approximately 14%, according to Realtor.com.

Sellers in some highly sought-after areas will still hold power in 2025. Inventory is improving, but still limited compared to years past. This gives sellers the upper hand when negotiating prices.

It’s difficult to predict how the latest presidential administration will take on the housing market recovery, but there is potential for a “Trump shock,” as Realtor.com calls it.

“While President-elect Trump can work quickly with his administration to implement some regulatory changes, other policies that will impact housing, such as tax changes and broad deregulation, require cooperation from other branches and levels of government,” Realtor.com chief economist. Danielle Hale said.

“The size and direction of Trump’s bump will depend on which campaign proposals ultimately become policy and when,” Hill said. “For now, we expect a gradual improvement in housing market dynamics supported by broader economic factors. The new administration’s policies have the potential to boost or hinder the housing recovery, and the details will matter.”

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FHFA announces higher mortgage loan limits for 2025

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