Will there be a Housing Market Crash?

Fed Officials Caution on Housing Market Risks as Rates Fall

Did the Federal Reserve just warn about a potential housing market downturn? The short answer is yes – the latest Federal Reserve meeting minutes reveal that officials discussed the risk of a “substantial deterioration” in the housing market while voting to cut interest rates. While a rate cut typically boosts affordability, policymakers noted that housing remains one of the weakest parts of the economy.

What Happened at the Fed’s September Meeting?

At its September 2025 meeting, the Federal Open Market Committee (FOMC) voted 11-1 to cut the federal funds rate by a quarter of a percentage point. The only dissenting vote came from new Governor Stephen Miran, who favored a larger half-point reduction (Federal Reserve, 2025) According to the official meeting minutes, “several participants noted continued weakness in the housing market,” and a few mentioned the possibility of “a more substantial deterioration” if affordability doesn’t improve (Realtor.com, Oct 2025)

Why the Fed is worried about Housing

Over the past three years, home sales have hovered near multi-decade lows, even as job growth and consumer spending stayed strong. Elevated mortgage rates and record-high prices have made homeownership increasingly out of reach. Realtor.com Chief Economist Danielle Hale described the housing market as “curiously weak,” warning that a further drop in demand for new-home sales could weigh on construction jobs and broader economic activity (Realtor.com, Oct 2025)

Why Mortgage Rates Don’t Always Drop When the Fed Cuts

It’s a common misconception that the Fed directly controls mortgage rates. In reality, the Fed sets short-term rates, while long-term mortgage rates are driven by the 10-year Treasury yield, investor sentiment, and inflation expectations. As Hale explains, “The Fed can cut its policy rate and longer-term rates like mortgage rates can still rise – just as we saw in late 2024 and early 2025”  (Realtor.com, 2025)

What This Means for San Diego Sellers

While national trends point to caution, San Diego’s housing market remains resilient thanks to strong job growth in sectors like biotech, defense, and technology. Still, the Fed’s comments signal a shifting balance. Here’s what to expect:

• Buyer demand may stay selective – motivated buyers are active, but affordability limits overall volume.
• Inventory could rise modestly as homeowners test the market before the year ends.
• Accurate pricing and strong presentation will matter more than ever.

The Bottom Line

The Fed’s September rate cut was meant as “insurance” against economic slowdown, not the start of a rapid easing cycle. For San Diego homeowners, the message is clear: stay informed, stay strategic, and make decisions based on local data – not national fear. If you’d like personalized insight on how rate shifts could affect your buying or selling plans, reach out to me! My team combines market expertise, clear communication, and data-driven guidance to help clients move with confidence – no matter what the headlines say.