The Fed Won't Budge! | Luxury Real Estate

How the Fed’s Rate Hold Impacts Housing Inventory and Prices

On June 18, 2025, the Federal Reserve voted to hold interest rates steady at 4.25–4.50%, signaling caution in the face of persistent inflation and global trade uncertainty. While the Fed still projects two rate cuts later this year, today’s decision sends a clear message: they’re not ready to loosen just yet.

So, what does this mean for residential real estate? Let’s break it down.

Inventory: What to Expect

New Construction is Slowing

While housing starts ticked up in May, building permits dropped by 2.7%, suggesting that developers are tapping the brakes.
With construction costs rising—thanks in part to new tariffs—many builders are delaying or scaling back future projects.
That means we’ll likely see fewer new homes hitting the market later this year, especially after the current supply is absorbed.

Existing Inventory is Piling Up

High mortgage rates continue to keep many potential buyers on the sidelines.
Homes are sitting on the market longer, and sellers are increasingly offering price cuts and concessions to attract buyers.
The result? A market with more available listings but softer demand—primarily in mid- to high-price segments.

Prices: Stuck in the Middle

Mortgage Rates Aren’t Budging

Although the Fed controls short-term rates, mortgage rates are influenced by broader economic forces, such as inflation and bond yields.
With inflation still hovering above 3%, mortgage rates remain high, keeping monthly payments out of reach for many would-be buyers.

Tariffs Add Pressure

New tariffs are pushing up costs for construction materials and durable goods, making inflation even stickier.
Until these pressures ease, the Fed is unlikely to cut rates aggressively—delaying any meaningful boost to affordability.

The Price Outlook

In the short term, we anticipate stable or slightly declining prices in many markets, particularly where inventory is outpacing buyer activity.
Builders are discounting new homes. That sets a lower benchmark for existing homes—pulling prices down across the board.

Market Snapshot: Next 6–12 Months

TrendShort-Term (3–6 Months)Mid-Term (6–12 Months)

Inventory Elevated; more listings than buyers May tighten slightly if permits stay low

Home Prices Flat or dipping, depending on location Could recover if rate cuts materialize

Buyer Activity Cautious and price-sensitive Likely to rebound with lower rates

What Could Shift the Market?

Fed Rate Cuts: The Fed still expects to cut rates twice this year. If that happens in Q3 or Q4, we could see mortgage rates fall—sparking new demand.
Tariff Relief: Any easing of trade tensions would lower input costs for builders and reduce inflation, creating more room for the Fed to act.
Economic Stability: The Fed projects unemployment will rise slightly to 4.5% by year-end. If the labor market softens, demand could cool further—unless offset by lower rates.

What Should You Do?

Sellers: Price competitively. Today’s buyers are sensitive to monthly payments, and listings that linger are often forced into deeper discounts.
Buyers: Take advantage of seller flexibility—there’s room to negotiate. If you’re financially ready, this could be a strong buying window before rates fall and competition returns.
Builders: Watch inventory closely. Consider slowing project pipelines and offering targeted incentives to encourage homeowners to move in sluggish markets.

Final Takeaway

The Fed’s rate pause is a wait-and-see move. In the short term, expect a soft housing market: high inventory, stable-to-lower prices, and cautious buyers. Real momentum will return only when rates fall and inflation cools.

If you’re buying, it’s a market with leverage on your side. If you’re selling, strategy and pricing precision matter more than ever.

Luxury Real Estate | Griffin Realty Group