At the end of last month, the Federal Reserve cut interest rates. While the meeting minutes released this week show that this recent Fed interest rate cut is not the start of a series of planned reductions but rather a “recalibration” of monetary policy, it is still important for real estate investors to review and understand how this change in rates affects the housing market and investments.
Interest rates were cut by a quarter point in July 2019. This is the first cut since the financial crisis of 2008 and it comes after the Fed raised the rate 9 times in the span of 3 years. This was done in the hopes of slowing down inflated markets. As many US real estate investors know, the market has been heating up and house prices have been increasing drastically across the nation. This has been pushing many first-time homebuyers to the side as well as discouraging new property investors from entering the real estate market.
As reports earlier this year showed that home sales across the nation began to drop, it quickly became apparent that the rate increases were having the intended effect. However, with this new Fed interest rate cut, the hope is to encourage more spending.
While there has been widespread criticism, stating that the interest rate cut was not high enough, the Federal Reserve is hesitant to make any more cuts as most economists agree that the national economy is not in a recession- which is the state which typically calls for major cuts. In fact, this week, it became clear that the Officials were split on the decision, some of them voting against the cut altogether. The reasons cited for this is the strong job market, historically low unemployment rates, and high consumer confidence. Steep interest rate cuts can lead to bubbles and inflation.
What It Means for Real Estate Investors
It is likely that the real estate market will be affected in a few ways. For one, buyers who were waiting for the chance to enter the housing market and purchase property may finally be able to make a move now thanks to the Fed interest rate cut. Essentially, home sales are bound to increase. And as buyer demand for property increases, house prices (which began to fall in some parts of the country earlier this year) will increase.
This may be a good time to sell an investment property and trade it in for a high-performing one. List your property for sale in the Mashvisor Property Marketplace to take advantage of these trends now.
Alternatively, if you have been waiting for the right time to invest in real estate, the interest rate cut may make things more affordable for you if you make a move before prices climb up any more.
Related: Report: Property Prices Are Still Rising in These 10 US Cities
If you already own an investment property and have an adjustable rate, you will benefit from lower monthly payments and overall cash flow. You can even take this time to refinance your investment property mortgage for lower payments.
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