I'm assuming your subject line was just a typo and you understand that the fed is getting ready to raise interest rates, not cut them.
The expectation of higher fed rate has already been baked into mortgage rates, which is why we've seen them go from under 3% to over 3.5% in the last month or two. Unless the fed signals this week that they are going to raise rates even faster than previously expected, I don't think you'll see mortgage rates move too much more in the near term.
Now, will this affect home prices? Absolutely. A half percent increase in rates fairly significantly reduces affordability. If someone has a max budget of $1,000 for their mortgage payment (excluding insurance and property taxes), at 3% they can afford a $237k house, but at 3.5% they can only afford $222k. That's a 6% drop in value.
However, because there seem to be more and more people buying with cash these days, I don't think the interest hike will translate to a 6% drop in the overall market, as there are still plenty of people willing to buy at the current prices.
All that to say, I think that the interest hike will do enough to make prices level out a bit, but barring a recession, prices almost certainly won't go down.
