Real Estate

Many Hoped A March Rate Cut Would Boost Housing. Now, It’s Not So Clear

Most real estate professionals believe rate cuts by the Fed will be crucial for a sales recovery, according to results from the Inman Intel Index survey. But the timing on those cuts is hazy.

This report is available exclusively to subscribers of Inman Intel, the data and research arm of Inman, offering deep insights and market intelligence on the residential real estate and proptech businesses. Subscribe today.

A unanimous opinion among real estate leaders is rare.

But according to January’s Inman Intel Index, or Triple-I, real estate professionals were nearly in lockstep on one thing: multiple rate cuts by the Federal Reserve this year will be a crucial component of the housing market’s recovery.

More than 96 percent of brokerage and mortgage company leaders who responded to the Triple-I in January agreed that a 2024 housing rebound relied at least somewhat on the Fed cutting rates multiple times.

Among these leaders, 55 percent believed “a good deal” of the recovery hinged on these cuts, and another 14 percent said the recovery was “entirely” contingent on them. 


Chart by Chris LeBarton

It’s fair to say, then, that it’s been a rough couple of weeks for those Federal Reserve watchers among a group where 60 percent believe consumers have not adjusted to or accepted mortgage rates in the range of 6 percent to 7 percent. 


While most still expect the Fed to lower its effective federal funds at least three times this year, the timing of those cuts has grown less clear since the Triple-I closed on Jan. 31st. 

Here’s why:

  • On that same day, Fed Chair Jerome Powell’s comments at the close of the committee’s January meeting deflated much of the optimism that the Fed would cut rates as soon as its next meeting in March.
  • Two days later, the Labor Department released another unexpectedly strong jobs report that showed an unemployment rate of 3.7 percent. Unemployment has been below 4 percent for the longest stretch in over 50 years.
  • Hopes of a March rate cut were all but dashed at 8:30 a.m., Feb. 12. That’s when January’s Consumer Price Index figures were released, and both the headline and core measures of inflation overshot market expectations

These developments do not guarantee the Fed holds its key interest rate, currently between 5.25 percent and 5.50 percent, in place when it meets next month. But beyond the clear communication from Powell and little data left to change the equation, a bullish Wall Street has changed its tune, too.

The CME Group’s FedWatch Tool, which tracks futures markets to predict the Fed’s moves, has shown a precipitous drop of investor belief in a March rate cut. Last week, just 10.5 percent of investors expected the Fed to slash rates in March. This is down from 39 percent immediately following the January meeting and a fraction of the 88 percent reading on Dec. 29.

Agents and loan officers in sync

The Triple-I provides monthly insights from agents and lenders, too, and similarity emerged in their outlook on the importance of rate cuts to their businesses.  

  • 2 out of 3 mortgage lenders rated a rate cut by March at a 4 or 5 in terms of importance, where 1 was defined as inconsequential and 5 represented critical. This finding comes amid the backdrop of several mortgage company closures and consolidations, which have intensified since the start of the year.
  • The percentage was only slightly less for agents: 60 percent of them categorized a March rate cut’s importance as a 4 or 5.

Mortgage rates ranked second on the list of business concerns for both agents and lenders.

Both groups still had the “lack of housing inventory” sitting atop their respective lists, despite some recent momentum in the number of homes newly listed for sale. In a counter-intuitive way, rates not falling — and even rising, to a degree — would help with their shared woe. When rates increase, fewer buyers qualify for homes, leading to inventory growth.

So when will mortgage rates go down?

Because the Fed’s rate actions don’t directly move mortgage rates, it’s only so helpful to keep looking into their magic ball.

But they do play a key role in influencing the markets, and entering the back half of February, three cuts were fully discounted in bond markets. A fourth cut by December was priced at slightly better than 60 percent odds.

What some market watchers are watching as much, if not more, is the prevailing spread differential between the 10-year Treasury bond and 30-year fixed mortgage rate. This spread — the average rate of a 30-year fixed mortgage minus the 10-year U.S. Treasury yield — had been coming down off a two-decade high of 2.9 percent.  Historically, the gap between the two measures is closer to 170 basis points.

As long as rates on U.S. Treasuries stay elevated, mortgage rates will remain high, too. But if the yield spread can compress again and the Fed starts its round of cuts, rates are still in a position to end closer to 6 percent than 7 percent by the end of 2024.

The only thing anyone seems to know, though, is that it’s unlikely to happen next month.

Methodology notes: This month’s Inman Intel Index survey was conducted Jan. 21-31, 2024. The entire Inman reader community was invited to participate, and Intel received a total of 1,029 responses. Respondents for this survey were directed to the SurveyMonkey platform, where they self-identified their profiles within the residential real estate market. Respondents were limited to one response per device, but there was no limitation to IP addresses. Once a profile (residential real estate agent, mortgage broker/banker, corporate executive/investor/proptech, or other) was selected, respondents answered a unique set of questions for that specific profile. Because the survey did not request demographic information for age, gender, or geography, there was no data weighting. This survey will be conducted monthly, with both recurring and unique questions for each profile type.

Email Chris LeBarton

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