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What will happen to home prices as interest rates are cut?

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Home prices could experience a shift due to mortgage rates dropping.

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Interest rates have been trending downward, with the Federal Reserve implementing its first cut of 2024 in September. Analysts predict more cuts could follow in the final months of this year and into 2025, potentially reshaping the real estate market.

But lower rates don’t always mean better deals or lower home prices. In fact, rate cuts can affect the housing market in surprising ways. Some experts predict rising prices, but declines and stability are also plausible under certain circumstances.

We’ve consulted industry professionals to break down each possibility. Their insights below can help you decide if you should buy a home in the coming months.

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What will happen to home prices as interest rates are cut?

Lower interest rates typically energize the housing market.

“The most likely scenario is that home prices will rise if rate cuts happen amid economic growth and limited housing supply,” says Albert Lord, founder and CEO of Lexerd Capital Management. That’s why he suggests buyers should “act quickly to take advantage of lower rates,” while “sellers may [want to] hold off to maximize offers as demand increases.”

Industry veteran Dean Rathbun echoes this view. The mortgage loan officer at United American Mortgage Company points out that rate cuts often trigger a chain reaction.

“The deeper the cut, the lower the rates… which means more borrowers in the marketplace, creating higher bids for desired homes,” Rathbun says.

Despite this consensus, the housing market’s complexity means different scenarios could unfold. Here are three possible outcomes for home prices in the wake of interest rate cuts.

Compare today’s top mortgage loan rates now.

1. Home prices will rise as interest rates are cut

When interest rates fall, the housing market usually heats up. Cristal Clarke, luxury real estate director at Berkshire Hathaway HomeServices, explains why: “As lower interest rates make borrowing more affordable, more buyers enter the market.” This usually drives up competition for available homes.

But interest rates going down isn’t the sole factor affecting home prices. A strong economy with a healthy job market and rising wages play a part, too. When these conditions align with low housing inventory, “demand can outpace supply, leading to upward pressure on home prices,” Clarke says.

2. Home prices will drop as interest rates are cut

While lower interest rates often boost home values, it’s not a guaranteed outcome.

Clarke warns that a significant economic downturn could lead to price drops, even with rate cuts. This less common scenario can happen when broader economic factors override the benefits of cheap borrowing.

She shares several conditions that could trigger this unexpected result. 

“[More] job losses or [low] consumer confidence might [give] buyers [pause], [even with] lower interest rates,” Clarke explains. Add to that high inflation eroding purchasing power or tighter lending standards, and you’ve got a recipe for potential price decreases.

In such cases, a surplus of homes on the market and fewer interested buyers could force sellers to lower their asking prices.

3. Home prices will remain the same as interest rates are cut

In certain cases, home prices could stay put, even when interest rates drop. According to Clarke, we may see steady home prices if the housing market maintains an equilibrium between supply and demand — even as interest rates decrease.

She points to high-demand areas including Santa Barbara and Montecito as examples. These places are always popular “due to [their] desirability and the rise of remote work,” Clarke says. Limited inventory can prevent significant price fluctuations in a given area, such as coastal cities.

Benefits of buying a home now even at higher rates

Waiting for lower rates might seem logical, but it could cost you in the long run. 

“When rates drop, buyers [flood the market] and prices tend to go up,” cautions Rathbun. This can drive up home prices, forcing you to overbid just to secure a property.

Buying now, even with higher rates, can work in your favor in the following ways:

  • Less competition: With fewer buyers in the market, you’re more likely to get your dream home without a bidding war.
  • Potential for refinancing: If rates drop later, you can refinance to lower your monthly payments.
  • Building equity sooner: The earlier you buy, the sooner you start building wealth through homeownership.
  • Predictable payments: Unlike rent, your mortgage payments won’t increase (with a fixed-rate mortgage)
  • More negotiating power: Sellers might be more willing to work with you when there are fewer buyers around

The bottom line

The impact of interest rate cuts on home prices isn’t always predictable. While lower interest rates may lead to higher prices, economic conditions can sometimes result in price drops or stability. Instead of trying to time the market, focus on your current situation and long-term goals. If you find a home you love and can afford the payments, it might be wise to act now.



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Historian Kenneth C. Davis on the power of reading

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Kenneth C. Davis, author of “The World in Books,” joins “CBS Mornings” to talk about the power of reading and the need to fight for the right to access books in an era of increasing bans across the U.S.

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Your friend loves a candidate you hate. Can your relationship survive?

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With Election Day around the corner, political divides grow deeper and relationships with certain friends and family members may feel increasingly strained. It leaves some wondering whether to sever ties over fundamental differences in political views.

While it’s been debated for a few elections cycles, experts say the question weighs even more heavily this year. 

Dr. Judy Ho, a clinical and forensic neuropsychologist and author of “The New Rules of Attachment,” has seen this dilemma ramp up recently in both her personal and professional life.

“If you encounter enough people, there’s going to be somebody who’s not the same as your views, and some people just get so much more fired up about it, and then it becomes extremely personal really quickly,” she told CBS News. 

The issue has even made celeb-studded headlines, with social media users dissecting the friendship between Taylor Swift, who made waves by endorsing Kamala Harris, and Brittany Mahomes, who Donald Trump praised last month for “defending” him.

Can you remain friends with people who hold political views antithetical to your own? Experts say there are a few things to consider when it comes to navigating political divides among loved ones. 

Why political differences cause problems

“Political divides are really problematic for relationships because they’re often deeply intertwined with people’s identities and core values,” Ho said. “When the beliefs are challenged, then it feels like a much more personal attack, and it triggers a defensive reaction.”

She said some research shows that when people encounter statements that contradict their deeply held beliefs, their brains react similarly to facing a physical threat.

“It puts them into a fight or flight stance, and that makes conversation impossible, because when you’re in fight or flight, you’re not going to have any kind of productive conversation,” she said. 

That’s why we tend to see disagreements that lead to unfriending someone occur more often around social views, and less around something like economic policy, said Dr. Laura Vogel, psychologist and director of mental health services at Momentous Institute.

“Particularly around those social views, that’s where it begins to connect to my identity as a person, who I am, what my faith is, those sorts of things,” she said. 

How to decide if your friendship has a future

So, how do you know when it’s time to take a step back — or completely away — from a friend or family member over these disagreements?

First, assess the relationship, experts advise.

Think about how much value this person adds to your life, Ho suggests, and also consider the logistics of whether if you’re going to see this person all the time at work or if they’re part of your family.

“Is it going to be really that feasible to just completely cut them off?” Ho said. “If a person is of value to you in some way, is important to you, then it’s important to try to work through the conflict instead of just completely shutting it out or completely never speaking to them about anything related to their beliefs.”

Vogel also suggests slowing down and thinking, “If I unfriend them, what impact will this have on me?” 

“When we are flooded with emotion, whether that’s shock or anger or shame, none of us make really good, thoughtful decisions,” she said. “Let that emotion settle and really reflect … and then make a decision. And I can’t tell anybody what that is, everyone’s going to have a different range of what is best for you.”

If you want to move forward with this person in your life, the next step may include having a conversation with them to better understand their views or to set certain boundaries. 

“If this is an important relationship, that’s where we want to really slow down and resist that temptation to make a snap decision, an impulsive decision, and then consider whether a conversation is important and necessary — a live conversation, not a Facebook conversation,” Vogel said. 

Your decision doesn’t have to be all-or-nothing, “remain close friends” or “completely cut them off,” experts say. Instead, you may decide to mentally or privately take a step back from someone but remain on amicable terms.

“If it’s a person who you share friends with, you can still see each other at parties and big get-togethers, but do you need to be calling them? No, you don’t,” Ho said. “It doesn’t have to be this huge black-and-white approach, because I don’t think that that’s always feasible.”

Social media versus real life

The threshold for “unfriending” someone in real life compared to on social media is typically different, too. 

“If you’re feeling a lot of stress and anxiety every time you get on social media, and it’s a handful of people that are creating that and you don’t really have a relationship with them, I think it’s good for us to have boundaries,” Vogel said.

Ho added that “muting” is a great option if you don’t want to see someone’s posts without outright “unfriending” or “unfollowing” them, which they may see. 

“I definitely think the bar is lower for online consumption, because we know that just passive consumption of things can really affect your mindset,” Ho said. 

On the other hand, real-life friends who you have more meaningful relationships with may be well worth the extra effort it takes to navigate differences. 

“Our good friends can challenge us,” Vogel said. “There’s that argument of, ‘You’re in this echo chamber and you’re not talking to people who have different perspectives than you.’ I think good friends who care about us can come to the conversations with curiosity and be able to listen to your perspective, and then you’re curious about how they’ve come to their perspective. But that’s a much more civil conversation, typically, with a good friend where you value each other versus somebody that you really don’t interact with anymore.”



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McDonald’s introduces the Chicken Big Mac

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McDonald’s adds the Chicken Big Mac to its menu for a limited time, offering a fresh take on the classic sandwich with chicken patties and no onions.

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