Wednesday, July 31st, 2024 – Federal Reserve Chairman Jerome Powell hinted at a potential reduction in the policy rate as early as the September 2024 meeting, provided the economic data supports such a move. “We think that the time is approaching,” Powell said. “If we do get the data that we hope we get, then a reduction in our policy rate could be on the table at the September meeting” (CNBC).
The CME FedWatch Tool, which we have mentioned in a previous blog post, is currently showing an 87.5% chance of a reduction of 25 basis points (0.25%), to a 500-525 basis points (5%-5.25%) target rate, down from the current 525-550 basis points (5.25%-5.5%) target rate.
Mortgage Rates and the Real Estate Market
A reduction in the policy rate by the Federal Reserve typically leads to a corresponding decrease in mortgage rates. Lower mortgage rates make borrowing cheaper for prospective homebuyers, increasing demand for real estate. Home owners who have lower interest rates may start to consider selling their homes, which will put more homes on the market and increase the number of real estate transactions.
Investor Activity
For real estate investors, a rate cut can signify an opportunity to finance investments at a lower cost. This may lead to increased activity in the single-family rentals market. Investors may seek to capitalize on the lower financing costs to expand their portfolios, potentially driving up property values in targeted areas.
Strategies for Buyers and Sellers
For buyers, a potential rate cut suggests a window of opportunity to secure lower mortgage rates. Prospective buyers should stay informed about the Fed’s decisions and be prepared to act quickly if rates drop. For sellers, the anticipation of increased demand might be a signal to list properties sooner rather than later to take advantage of favorable market conditions.
Fed Rate Cut in September 2024: Implications for the Real Estate Market
The Federal Reserve’s potential rate cut in September will have significant effects on the single-family rental market. Staying informed and strategically planning can help stakeholders navigate these changes effectively. Follow our blog to keep up on market movements and sign up for our investment platform to capitalize on new opportunities.