At long last, the time has finally come for the Fed to begin cutting rates in September. As a result, real estate investors will likely benefit from a tailwind over the next couple of years, after a rough prior two years.
Mortgage rates peaked in October 2023 but rose again from December 2023 through April 2024. Now, it’s safer to say that rates should continue trending lower as the Fed starts cutting the short end of the curve. As the economy softens, interest rates will likely stay muted.
In the spring of 2024, we saw some wild bidding wars, but activity has slowed for two main reasons. First, a significant number of buyers are waiting for confirmation of rate cuts before entering the market. Second, with the November 5, 2024, presidential election looming, many buyers are opting to wait and see who takes office before making one of the biggest purchases of their lives.
Given the drop in mortgage rates and the current hesitancy among buyers—especially during the traditionally slower second half of the year—there’s a window of opportunity to purchase residential real estate right now at better prices. Fall and Winter are my favorite seasons to buy due to less competition.
Demand For Real Estate Could Surge Higher
In my podcast with Ben Miller, CEO of Fundrise, we discuss how a negative real estate spread is holding back investment committees from approving commercial real estate deals. A negative spread occurs when borrowing costs exceed property yields, which has caused transaction volumes to drop significantly.
However, once we see a neutral or positive real estate spread—largely driven by falling interest rates—we’ll likely experience a surge in purchase activity, pushing prices higher.
That said, the future remains uncertain. Mortgage rates could remain flat or even rise again, dampening demand. But if the
