The moment the real estate industry and much of the nation had been anxiously waiting for has finally arrived. The Federal Reserve announced that it is cutting interest rates by 0.50%—the first rate cut since early 2020 and twice as large as the quarter-point cut initially expected.
It marks the end of a fraught two years, during which the Fed lifted interest rates to a 20-year high and maintained them to lower inflation and slow an economy that had seen the cost of housing, food, and more spiral upwards.
For investors, the more significant rate cut is excellent news. This bold move was caused by the Fed turning its attention to the jobs market—not wanting to cause further employment losses now that they feel inflation is under control.
More Cuts to Come
The Fed also projected another half-point rate cut later this year, lowering the central bank’s policy rate to 4.4%. By the end of 2025, they expect rates to be down to 3.4%.
The news has already sent stocks surging and will doubtless spark a buying frenzy in the real estate market. Homebuyers and investors know with a degree of certainty that for the first time in two years, even if they buy at a higher rate now, they can refinance to a lower rate in 18 months.
Flippers and Landlords Can Breathe a Sigh of Relief
Politically, the Biden administration will herald the move as a sign of success against inflation and of better days to come for borrowers, businesses, and consumers. For house flippers and buy-and-hold investors, it means a less-fraught period of borrowing at high rates while renovating homes and higher cash flow when buying rentals. However, the news of future rate cuts and the buying activity it will bring could also cause prices to increase.
For owners struggling with high mortgage rates, the cuts offer a chance to refinance and cash flow or lower monthly expenses. Rate-locked homeowners who have resisted listing their homes for fear of losing their low…