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The U.S. housing market is in a slump, and the Federal Reserve has taken notice.
Notes from the Fed meeting in September (1) highlighted concerns about a weakening job market alongside potential housing market deterioration. As a result, they cut the federal funds rate by a quarter-point. That means the benchmark interest rate now sits at 4.25%.
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Despite the slowdown in housing activity, Fed Chair Jerome Powell reiterated on Oct. 13 that the central bank won’t directly intervene in the mortgage market.
Federal Reserve officials noted that job gains were slowing and unemployment was ticking up. Here’s what it all means for the housing market, whether you’re planning to buy or hoping to sell.
Food for thought
Many homeowners are struggling. According to ATTOM Data, as of September, foreclosure filings were 20% higher than a year prior. (2) On a national scale, one in every 3,997 housing units had a foreclosure filing.
As for the homebuilding industry, professional builders are still facing high borrowing costs. Renovation activity has slowed, and the recent rate cut will still take some time to trickle down to the broader economy, according to Barrons. (3)
Read more: How much cash do you plan to keep on hand after you retire? Here are 3 of the biggest reasons you’ll need a substantial stash of savings in retirement
What the data says
According to a National Association of Realtors press release (4) from September, sellers might be in for a rebound — just not quite yet.
"Home sales have been sluggish over the past few years due to elevated mortgage rates and limited inventory,” NAR chief economist Lawrence Yun said. “However, mortgage rates are declining and more inventory is coming to the market, which should boost sales in the coming months."
All told, 800,000 new single-family houses were sold in August 2025, according to seasonally-adjusted estimates from the U.S. Census Bureau and the Department of Housing and Urban Development. (5) That was 20.5% above the July 2025 figure of 664,000.
Although a boost in sales is a good sign of some recovery, it’s only one piece of the puzzle.
“…even if the Fed made a sizable rate cut”
While the Fed cut rates in September, a decrease in borrowing costs isn’t necessarily a silver bullet to revive the housing market.
Many homeowners are already “locked in” to cheap pandemic-era mortgages, which have contributed to housing supply problems by making it difficult to move at all. Fed research attributes almost half of the U.S. consumers’ drop in mobility from 2021 to 2022 to the mortgage rate lock-in effect.
First-time buyers may feel the squeeze the most. A recent Fed board speech by Governor Adriana D. Kugler (6) highlighted that higher mortgage rates disproportionately reduce purchases by lower-income households, which pushes homeownership dreams further out.
The fact is, the 10-year U.S. Treasury yield is more closely tied to fixed-rate mortgages than the federal funds rate, according to CNBC. (7) While it’s dropped somewhat since the rate cut, it remains high.
Is now a good time to buy?
If you’re in the market for a house, you might be stuck with a low-interest pandemic-era loan, or perhaps houses still just feel too pricey and you’re waiting for mortgage rates to fall further before jumping in.
But some experts say if you have the means, you should not wait for mortgage prices to fall. It would take a drastic drop in housing prices to make homes feel affordable in many major U.S. cities, and the future of mortgage rates, which have been consistently elevated in recent times, remains uncertain.
If you have some flexibility, you may want to widen your search to neighborhoods with rising inventory. Especially in cities in the Midwest and South, Zillow (8) estimates houses can be affordable even with a 6.7% interest rate.
Think about it like this: More housing supply can mean less market competition for properties and move power from the seller to the buyer.
Once you’ve set your sights on a property, it’s always best practice to have all your documents ready to go, and if possible, try to get pre-approved for a mortgage.
Tools like the Mortgage Research Center (MRC) can help make that process smoother and faster.
With MRC, you can quickly compare rates and estimated monthly payments from multiple vetted lenders. By entering basic details — such as your zip code, property type, price range and annual income — you can view mortgage offers tailored to your needs and shop with confidence.
After all, even a small rate reduction can translate into significant savings over the life of a loan.
Is now a good time to invest in real estate?
While it may not exactly be the best time to buy, real estate in some parts of America would remain unaffordable, no matter the interest rate.
Zillow’s report found that even a 0% rate wouldn’t make the typical house affordable in some expensive coastal metros: New York, Los Angeles, Miami, San Francisco, San Diego and San Jose. Elsewhere in the U.S., mortgage rates would need to drop about 4.43% to improve affordability.
That said, there are other ways to take advantage of real estate without having to buy a home outright.
If you’re wary of the rising cost to buy a home, one way to take advantage of the real estate market is through Homeshares, which provides accredited investors access to the $34.9 trillion U.S. home equity market.
Historically, this has been the exclusive playground of institutional investors. But now, with a minimum investment of $25,000, investors can gain direct exposure to hundreds of owner-occupied homes in top U.S. cities through Homeshares’ U.S. Home Equity Fund — without the headaches of buying, owning or managing property.
Homeshares offers risk-adjusted target returns ranging from 12% to 18%, and can be an effective, hands-off way to invest in owner-occupied residential properties across regional markets.
With built-in downside protection up to 45%, an asset would need to depreciate by 45% in order for you to even incur any losses. Plus, with their portfolio of Home Equity Agreements, you can benefit from automatic diversification and are better protected from having all of your eggs in one basket.
And for a limited time, Homeshares will provide Moneywise readers an exclusive 5% bonus for IRA investments.
If you’d prefer to stay away from HEAs, another option is to work with Arrived to boost your investments for retirement. Arrived helps you buy fractional shares in rental homes and vacation rentals for retirement — letting your potentially profit without having to deal with burst pipes or midnight maintenance calls.
Arrived’s real estate investments are curated and vetted for their appreciation and income potential. Backed by world-class investors like Jeff Bezos, Arrived makes it easy to fit these properties into your investment portfolio regardless of your income level.
Working with arrived is a simple process, and you can invest your cash flexibly across multiple properties and varying amounts. You can get started with just a $100 initial investment to see if Arrived is right for you.
Even better, Arrived is currently rolling out a secondary market for selling shares. This means that you’ll have even more flexibility with buying, selling and holding your investments to suit your needs.
Beyond residential real estate, you might also be interested in adding commercial real estate to your investment portfolio. This is especially true for those with capital on hand.
For years, direct access to the $22.5 trillion commercial real estate sector has been limited to a select group of elite investors — until now.
First National Realty Partners (FNRP) allows accredited investors to diversify their portfolio through grocery-anchored commercial properties, without taking on the responsibilities of being a landlord.
With a minimum investment of $50,000, investors can own a share of properties leased by national brands like Whole Foods, Kroger and Walmart, which provide essential goods to their communities. Thanks to triple net leases, accredited investors are able to invest in these properties without worrying about tenant costs cutting into their potential returns.
Simply answer a few questions — including how much you would like to invest — to start browsing their full list of available properties.
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Article sources
We rely only on vetted sources and credible third-party reporting. For details, see our editorial ethics and guidelines.
Board of Governors for the Federal Reserve System (1), (6); ATTOM Data (2); Barrons (3); National Association of Realtors (4); U.S. Census Bureau (5); CNBC (7); Zillow (8)
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.