ARKANSAS, USA — On Wednesday, the Federal Reserve cut interest rates by .50 percentage points. This is the first rate cut in more than four years.
The Fed said the cut lowers the federal funds rate into a range of 4.75% to 5%, which is down from its prior range of 5.25% to 5.5%.
"What we've seen in the last couple of months is the unemployment rate has ticked up ever so slightly. And so, today's rate cut reflects the environment where inflation rate has declined to two and a half percent, and they're trying to prevent the unemployment rate from going up any further," said Mervin Jebaraj, Director for the Center of Business and Economic Research at the University of Arkansas.
"Immediately after the pandemic, we had serious about inflation, and then response to that, the Federal Reserve had raised rates consistently, and so the rates were between 5.25% and 5.5% for a long period of time," Jebaraj said.
As Northwest Arkansas struggles with supply and affordability, this still doesn't mean the area will see a decrease in home prices.
"This is not going to help the housing market a whole lot in Northwest Arkansas," Jebaraj said. "Unfortunately, it's probably going to increase as more people try to buy homes with lower mortgage rates. So the home prices are going to go up."
Realtors say that there's a lot of buyers in the market right now, as interest rates are better than the beginning of 2024.
"Since interest rates are better right now, buyers are able to afford more than they were at the beginning of the year," said Katlyn Munch, a Northwest Arkansas realtor. "Home prices are continuing to go up, because here in Northwest Arkansas, we are a very competitive market. We have a lot of people relocating here. So if you're waiting for house prices to drop, I wouldn't bank on that, because that's not going to happen."
Munch said they've already anticipated the lower interest rates and they've already been cut in the market. She said those are the numbers they'll see for the next few months.
Kiley Connor, who's a mortgage lender for AMC Mortgage, said this could impact someone want to put a home on the market.
"As rates go down, you could see more sellers enter the market, because they are open to selling their home and not afraid of the interest rates anymore. I know a lot of people were holding on to that 3% 4% interest rate," Connor said. "We're definitely seeing more people trickle back into the market. There were a lot of people on the fence, especially, waiting for today, essentially, to see what's going to kind of happen with the market."
The higher mortgage rates were making people skeptical to put their home on the market. With fewer homeowners wanting to sell, buyers were faced with less supply and higher mortgages.
"We're seeing the best interest rates that we've seen in probably a year and a half, if not longer, and so now's a great time if you haven't talked to a mortgage lender, just check in and see, you know what you could afford," Connor explained. "If you have previously bought, now is a great time just to check in see if you could qualify for refinance and get that monthly payment lowered."
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