At the annual Jackson Hole Economic Symposium, Jerome Powell signaled that the Federal Reserve is ready to start cutting short-term interest rates — exactly what the real estate industry, investors and President Donald Trump have been waiting to hear.

The Fed chairman's speech touched off a stock market rally and sent mortgage rates downward on Friday, Aug. 22. All the major real estate stocks were significantly higher in early-afternoon trading, with many jumping 5-10% halfway through Powell's remarks.

Mortgage News Daily pegged the 30-year fixed rate at 6.55% on Friday afternoon, down from 6.62% the day before.

The key takeaway from Powell's speech? The central bank is now more willing to address the labor market's weakness through rate cuts — even if inflation is still higher than the Fed's target, according to Realtor.com Senior Economist Jake Krimmell.

What this means for real estate: A rate cut would have two significant implications for the housing market, Krimmell predicts. In the short run, 30-year fixed-rate mortgage rates should remain near current 10-month lows of around 6.5%.

And over the long term, a more balanced view of employment and inflation risks should reduce the anxiety that has kept many buyers and sellers out of the market.

"Going forward, resolving economic uncertainty will be key for restoring consumer confidence and jumpstarting the housing market this fall, and beyond," Krimmell said.

Cuts could 'revive buyer interest': While the Fed appears ready to take a more neutral stance on rates, cuts will be gradual and data-dependent, according to Sam Williamson, senior economist at First American — but any reduction might be enough to perk up the market.

"For the housing sector, even modest rate relief could improve affordability, revive buyer interest, and offer a much-needed boost to builders and lenders heading into the fall," Williamson said.

Hope for home builders: That "much-needed boost to builders" would come in the form of lower borrowing costs for construction projects — welcome news for an industry that has fallen into a slump as it deals with higher costs and sluggish demand.

Powell's speech also suggested that tariffs are not leading to persistent inflation, and any price impacts will be short-lived, according to Robert Dietz, chief economist at the National Association of Home Builders. That's a big deal for builders, who have been hit with price increases on some materials.

"Moreover, while not addressed in today's comments, some of the pressure from tariffs is being relaxed as trade deals are arranged and de-escalations of some trade tensions are undertaken," Dietz said, citing Canada's Aug. 22 announcement that it is dropping most retaliatory trade actions against the U.S. and the ongoing negotiations with China as examples.

Original Article by: Dave Gallagher, Real Estate News