Fed Cuts Rates for the First Time in Nine Months — What It Means for San Mateo Peninsula Buyers & Sellers

The Federal Reserve just cut interest rates for the first time since December 2024. But what does that mean for real estate here on the San Mateo Peninsula? Let’s break it down in simple terms.

What the Fed Just Did

On September 17, 2025, the Federal Reserve lowered its key interest rate — the federal funds rate — by 0.25%. This brings the target range down to 4.00% – 4.25%, the first cut in nine months.

The Fed made this move because economic growth has slowed, job gains have softened, and inflation is easing but still above their 2% target.

Fed Funds Rate in Context

The federal funds rate had been steady in the 4.25% – 4.50% range since the Fed’s last cut in December 2024. On September 17, 2025, the Fed lowered it again to 4.00% – 4.25%.

📊 Fed Funds Rate Trend (see chart above):
The Federal Reserve cut rates in December 2024 and again in September 2025, lowering the federal funds rate to 4.00%–4.25%.

This chart shows how the Fed held rates steady for most of 2025 before making this new adjustment in September.

Why the Fed’s Move Matters

When the Fed cuts rates, it’s a signal that borrowing money could start getting easier. Mortgage rates don’t always move the same day — but they’re tied to the same economic forces.

Here’s why this matters:

Investors can put their money into safe U.S. government bonds, or into mortgages, which usually pay a little more.
When borrowing costs get too high, it slows down the housing market — fewer buyers take out loans, and fewer mortgages are created.
A Fed rate cut encourages more activity, keeps investors interested in mortgages, and over time helps ease home loan rates.

That’s good news for both buyers and sellers.

How a Fed Rate Cut Impacts Real Estate

📉 Fed Cuts Rates → 💼 Investor Confidence Improves → 📊 Treasury Yields Fall → 🏦 Mortgage Rates Ease → 🏡 Real Estate Activity Boosts

What Each Step Means

📉 Fed Cuts Rates
The Fed lowers its key interest rate — signaling that borrowing money should get easier.

💼 Investor Confidence Improves
Investors feel more comfortable putting money into mortgages when the economy looks more stable.

📊 Treasury Yields Fall
As investors buy more U.S. government bonds, the returns (yields) drop. This creates a lower “baseline” for long-term interest rates.

🏦 Mortgage Rates Ease
Since mortgages compete with Treasuries, lenders don’t need to offer as high of a rate to attract investors — which helps bring mortgage rates down.

🏡 Real Estate Activity Boosts
Lower mortgage rates improve affordability, bringing more buyers into the market and giving sellers more opportunities to sell at strong prices.

What It Means for Buyers

For buyers, this is a welcome shift. Lower borrowing costs mean:

Lower monthly payments on your loan.
Better affordability if you’ve been waiting on the sidelines.
A chance to revisit your buying power before competition heats up again.

What It Means for Sellers

For sellers, this is a double win:

Lower borrowing costs usually bring more buyers into the market, boosting demand for well-priced homes.
If you’re planning to downsize, upsize, or buy again, lower rates can also make your next loan more affordable.

Local Inventory: Why It Matters

San Mateo County’s housing inventory has stayed between 1.6 and 2.1 months of supply this year — well below the 6 months considered a balanced market. This means limited choices for buyers and strong demand for seller

The Bottom Line

The Fed’s decision won’t transform the market overnight, but it is an encouraging step. More affordable loans can energize both buyers and sellers, and here on the Peninsula — where inventory is already limited — that could mean more competition and activity in the months ahead.