At beginning of the year and even in February blogs/videos, I have eluded to the expectation that we will see rate cuts this year which might help the Real estate market. But seems like that’s not going to happen.
- Hot economic indicators in 2024 challenge the anticipation of Federal Reserve rate cuts. A robust economy with a 3.3% GDP increase, 353,000 new jobs in January, and a 3.1% inflation rate may keep interest rates high.
- Stocks might still perform well despite high interest rates, but bonds and real estate could face significant challenges. The S&P 500 is expected to yield strong returns, not because of potential Fed cuts, but due to the groundwork laid by previous Fed policies.
- The commercial real estate sector, especially office spaces, is under pressure from the Fed’s high-rate environment. With a looming debt maturity wall, property owners face refinancing at higher rates and lower valuations, potentially leading to $1 trillion in losses in the office market.
In the residential sector, failure to bring rates down meaningfully would lead to another year of frozen markets. It would likely be a repeat of last year, when inventory was woefully low and sales were the lowest since 1995.
“The real estate market would be undercut by the Fed’s failure to cut interest rates,” according to analysts.
With that being said, you never know about Feb and they might come out and do rate cut in Jun to boost home buying. But they don’t, then we are going to see repeat of 2023 and market is going to build inventory and many buyers and investors might stay away and continue to rent like they been doing since end of 2022.
Again, another waiting game but most likely seems like we might get a boost from my prediction..
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