Interest rates seem to have reached a peak, and we’re seeing the 30-year fixed mortgage rate drop to 7.22%, all while the CPI (consumer price index) has finally cooled to 3.2%. With this recent data and signals picked up from Fed Chair Jerome Powell’s speech this morning, it’s predicted that the Federal Reserve will most likely end its federal interest rate hikes, and this is a good sign for real estate investors, personal home buyers, and sellers who have been waiting for an opportunity to jump back into the market.
Even with the numbers looking optimistic, because the U.S. economy has undoubtedly been unstable over recent years, many analysts don’t have faith that the market will recover any time soon. This has prompted some to feel it’s inevitable that a housing crash is on the horizon, one that will create an unsuitable climate for home buyers and sellers alike. But those who diligently study the economy and real estate know that if interest rates stay on this downward path, the opposite will occur, and a hot rental market will emerge.
Declining Interest Rates Coupled with High Demand for Property Equates to a 2024 Real Estate Boom
Investors are seeing indicators that will push the housing market to thrive, not deflate, and this includes the fact that the demand for real estate is through the roof. As the Chief Economist at the National Association of Realtors states, “There is not going to be a home price crash. When you have a housing shortage, home prices simply cannot decline in any measurable way”.
In other words, with real estate in such high demand and houses being swept off the market even before they’re built, the housing market is far from crashing. A slim chance of a crash occurring is also backed by the fact that mortgage rates have lowered to 7.22% from October’s high rate of 7.79%.
The Fed May Keep its Benchmark Interest Rate Unchanged
Real estate investors’ fears have eased up amid signals that the Fed may keep its benchmark interest rate unchanged when it meets mid-December. Additionally, with the CPI at 3.2%, down from 3.7% in September, interest rates are not likely to spike anytime soon; at least this is what everyone is hoping for.
Those who are hopeful also realize that nothing is set in stone, as noted by Krishna Guha, the Vice Chairman of Evercore ISI, a global investment banking advisory firm, when she stated, “We’re always cautious about putting too much weight on any one reading, but I do think that this is an influential report. This makes it extremely unlikely that the Fed will raise rates further in December. That was already a low probability.”
U.S Weekly Average Mortgage Rates as of 11/30/2023
What Does This All Mean For Property Sellers and Buyers?
The CPI and interest rates seem to be headed in a better direction, but what exactly does this mean for the real estate market? With mortgage rates falling, homeowners who want to sell but haven’t been willing to let go of their low mortgage rates, now have a renewed hope of finally putting their property on the market. This also creates an opportunity for individuals who have been unable to buy a home due to high rates and low inventory to move forward with a purchase.
When this all comes to a head, there could be a massive burst in buying and selling, most likely after the hustle and bustle of the holiday season, with some predicting a timeframe of April or May of 2024.
Rental Real Estate Purchases are Taking Place Now Before the Bidding Wars Begin
Even if new sellers start popping up on the market, inventory will still be low, and demand high from the burst of buyers that will swarm the market. This possible scenario has investors calculating that it would be wise to begin investing in rental real estate by the end of this year. This well-calculated approach will prevent them from getting caught up in the bidding wars that could occur when the race to buy up available properties begins. Everything seems to be lining up for a hot market, to the point where even foreign investors have also keened in on the fact that this is an opportune time to invest in U.S. rental real estate.
Related Article: The Best Strategies for Buying U.S. Real Estate if You’re a Foreign Investor
Some investors are still hesitant, though, feeling it would be best to wait until interest rates drop even further. However, with such a low inventory, waiting may leave them empty-handed. Buying now at an interest rate of 7.29% and then refinancing when the rates lower is a strategy that seasoned investors are implementing, one that puts a cash flowing investment in their hands.
Not hesitating to invest is further validated by the current uptick in recent mortgage applications. “The current trajectory of rates is an encouraging development for potential homebuyers, with purchase application activity recently rising to the same level as mid-September when rates were similar to today’s level,” states Sam Khater, Chief Economist at Freddie Mac.
With the demand for real estate far outpacing supply, those wishing to invest in a lucrative rental property before the market is saturated with buyers can easily do so by turning to a full-service real estate company such as Morris Invest.
Related Article: How to Easily Buy a Rental Property Before the End of the Year.
At Morris Invest, a team of professionals will take care of all the details on behalf of the investor. This includes locating a new construction rental property in a hot market, placing a property manager and tenant, and more. Feel free to schedule a call with Morris Invest if you’d like to discuss your real estate investing goals. For more information, you can also visit the Morris Invest & SDIRA Program Overview page.
Take a moment to view the following video that touches on this topic and provides information related to the real estate market and the economy in general:
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