The Federal Reserve enacted its first interest rate cut since the pandemic on September 18, 2024, slashing half a percentage point off benchmark rates—from 5.25% to 5.5% down to 4.75% to 5%
This rate cut is the Fed’s first since 2020, but it won’t be the last. On average, members of the Fed’s rate-setting committee expect borrowing costs to drop by another half-percentage point this year and an additional full point next year. That plan would reduce the key rate to about 2.9% by the end of 2026.
Here’s how the cut in interest rates is expected to affect the real estate market.
How the Interest Rate Cut May Affect the Real Estate Industry
Historically, interest rate cuts have increased buyer demand, leading to more transactions and higher home values.
Lower interest rates will lead to increased buyer demand.
Buyers who were previously hesitant to enter the housing market due to high borrowing costs are expected to return following the interest rate cuts, creating a resurgence in demand.
In August 2024, the number of homes sold was down 5.5% year over year, and the national average 30-year fixed-rate mortgage rate was 6.5%.
However, the new rate range is between 4.75% and 5%, making monthly mortgage payments more manageable for buyers—especially first-time homebuyers who may have been waiting on the sidelines.
With the additional demand, home values are expected to increase.
In August 2024, the median home price in the U.S. was $433,229. However, as demand increases, home values often rise. This increased demand will affect more than just the largest or historically most expensive housing markets. Check out our list of rising real estate markets in 2024.
How Interest Rate Cuts May Affect the Real Estate Industry
Increased market activity and home prices mean it’s a good time to become a real estate agent. More volume and higher prices will lead to larger commissions for real estate agents, making it a financially attractive time to enter the field.
Additionally, this increased activity means more opportunities for new agents to gain experience and build their client base. It’s an excellent environment for learning and growing your skills quickly.
“Now is the time to start a real estate career,” said Tina Lapp, Senior Director, Business Operations for Colibri Real Estate. “As interest rates become more favorable and we are starting to see more inventory in most markets, we will see an increase in real estate activity. Those buyers and sellers are looking for real estate professionals to help them through the process more than ever before.”
It’s important to note that to become a real estate agent in the U.S., you must earn a license. Each state has its own license requirements, which typically include the following steps:
- Complete a pre-licensing class
- Pass a licensing exam
- Fill out an application
- Pass a background check
You don’t need a college degree to become a real estate agent, and you can begin earning commissions as soon as you earn your license.
Start the licensing process today by enrolling in a self-paced pre-licensing course with Colibri Real Estate School. Our affordable pre-licensing packages and test prep materials are expertly designed to help you earn your license as fast as possible. We are so convinced you’ll succeed with our courses that we offer a Pass or Don’t Pay Guarantee.
Key Takeaways
- Lower interest rates make mortgage payments more affordable, attracting buyers who were previously hesitant due to high borrowing costs, especially first-time homebuyers.
- The rate cut stimulates market activity, resulting in more transactions. This surge provides new agents ample opportunities to build their client base and gain experience quickly.
- Increased demand typically drives home values up, leading to higher potential commissions for real estate agents. Thus, it is an attractive time to enter the field.
- With favorable market conditions and growing inventory, it’s a prime moment to pursue a real estate career. Prospective agents can start earning commissions quickly after meeting licensing requirements.
Discover your state’s real estate licensing requirements and choose a pre-licensing package that meets your needs. Financing is available! Questions? Contact a member of our team today!
