Yes, the Federal Reserve’s recent projection of falling interest rates in 2024—to the more-aggressive-than-expected tune of 75 basis points—sent stocks skyrocketing to previously unseen heights.But what, exactly, does this shift mean for the real estate market?Here are a few likely trends to keep an eye on….
A More Accessible Market
Affordability is, of course, a relative measure. But there is no doubt that rising interest rates—combined with general inflation and a market that hadn’t really cooled from the pandemic-induced boom—has kept many buyers (understandably) on the sidelines. Next year, however, as interest rates cuts lower mortgage payments and increase the equity upside, properties of all stripes will become steadily more attractive once again for a larger, more diverse range of buyers. And investors seeking higher yields could be back on the hunt for single-family homes to flip, rental properties, and real estate investment trusts (REITs).
A New Appreciation for Prices
Building upon the above trend, there is a very good chance property values will rise along with GDP: As affordability allows more buyers to enter the market, supply and demand will work their magic. Homeowners and property investors could see significant appreciation—and substantial gains in equity on the horizon.
Refi Renaissance
Lower interest rates will also likely translate to a surge in refinancing—not only from buyers who secured mortgages over the last few years at higher rates over the last couple years, but also from homeowners who put off founding renovations and other priorities while rates were high. This cash infusion could very well help nudge both consumer spending and the construction/contracting sector upward.
The New Construction Effect
Lower interest rates and higher profits mean less risk in the real estate market for developers who would like to finance and build new homes, apartment complexes, and commercial properties. Remember, new construction can change the game in neighborhoods, making the potential upside that much greater—and potential downside that much less steep—for those who invest in and renovate other nearby properties. A rising real estate tide raises all boats…and many buildings.
A Lifeline for Commercial Real Estate?
It’s no secret the pandemic work-from-home paradigm shift and technological interconnectivity have wreaked havoc on the commercial real estate market. Why, many businesses ask themselves, should we rent multiple floors in a large office building when many employees are only commuting into the office two or three days a week? Despite some buyer’s remorse on work-from-home arrangements, the math just does not work for many businesses. Falling interest rates could change that, encouraging some—though definitely not all—businesses to expand, lease office space, or invest in new space. Naturally, all of this is contingent on broader economic and political conditions. Still, change seems likely. And with change comes opportunity for those with foresight, vision, and the right partners. As Florida’s leading balance sheet lender, A&S Capital offers bespoke solutions for virtually all real estate bridge funding needs. Our professional team is dedicated to making the loan process painless, transparent and successful for domestic and foreign clients alike.Don’t delay—reach out for a consultation today.
