What the Fed’s Decision Means for the Housing Market Right Now

Federal Reserve Keeps Rates Unchanged!

This week, the Federal Reserve met and made a move that, at first glance, doesn’t seem like much: they left interest rates unchanged.

So, what does that actually mean for housing?

Let’s break it down.

The Fed Rate vs. Mortgage Rates

The Federal Reserve rate (also called the federal funds rate) isn’t the same thing as mortgage rates. It’s the rate banks charge each other to borrow money overnight. But it does influence the broader financial environment, including mortgage interest rates.

Generally speaking, when the Fed lowers their rate, borrowing becomes cheaper across the board. When they raise it, things like credit cards, auto loans, and mortgages tend to follow. But it’s not a 1-to-1 relationship.

Mortgage rates are influenced by a mix of factors, including:

• Inflation trends

• The bond market (specifically 10-year Treasury yields)

• Investor demand for mortgage-backed securities

• Economic data (like job growth and consumer confidence)

That’s why sometimes mortgage rates move even before the Fed makes a decision—because the market is anticipating what’s coming.

So What Happens Now?

By holding rates steady, the Fed is signaling a wait-and-see approach. Inflation has cooled quite a bit from its peak, but the Fed wants to be sure it stays under control before cutting.

For homebuyers, this means mortgage rates may stay in the current range a bit longer—but the expectation is that cuts could come later this year or in early 2026.

And when mortgage rates fall by even one full percentage point, it’s a game changer.

Over 5 million households typically re-enter the market when that happens. That kind of demand puts upward pressure on home prices, reduces buyer leverage, and makes bidding wars more likely again.

If You’re Thinking of Buying This Year...

It’s tempting to wait for lower rates—but that comes with trade-offs.

Right now, we’re seeing:

• Sellers offering concessions (closing cost credits, rate buydowns, or repairs)

• Less competition compared to a hot market

• The chance to negotiate more favorable terms

Waiting could mean a lower interest rate eventually, but you may end up paying more for the home or having to compete with dozens of other buyers.

Plus, refinancing is always an option if rates drop meaningfully in the future.

What Needs to Happen for Affordability to Improve?

Affordability is a combination of home prices, mortgage rates, and income levels. While prices likely won’t fall in most markets (inventory is still tight), a meaningful drop in rates could offer some relief, especially paired with moderate income growth.

The housing market would benefit from:

• Continued progress on inflation

• Fed rate cuts (ideally starting this fall or early next year)

• New construction to help ease supply pressure

  
  

Bottom Line

The Fed held rates steady, but that doesn’t mean you should stand still. If you’re planning to buy, this could still be your window to act before the next wave of competition hits.

If you’re curious about what homes are available, what sellers are offering, or how much home you can afford today, reach out. Let’s talk through the numbers and timing together.

317-629-0070

Paul Linn

Paul Linn Indianapolis Realtor