In line with the Federal Reserve’s previous move that cut the benchmark interest rate by 0.50 percentage points, rates have been decreased once again. The second Fed rate cut of the year, which took place just two days after the presidential election, was lowered by a quarter point, settling in the range of 4.5% to 4.75%. This cut highlights the Federal Reserve’s renewed goal of bolstering the job market while also addressing inflation, which currently hovers just above the central bank’s 2% target. The Fed’s post-meeting statement touches on these two indicators, as it reads, “unemployment rate has moved up but remains low,” and regarding inflation, while closer to its mark, it “remains somewhat elevated.”
The rate has decreased by a total of 75 basis points compared to its level on September 1st. Additionally, if interest rates continue their downward trend, there is potential for rates to drop even more during the Fed’s final meeting of 2024 in December, which could possibly lead to a hopeful New Year for the housing market and for those in debt.
Regarding this, Matt Schulz, LendingTree chief credit analyst, comments, “Once a few more cuts happen over the next few months, the impact will add up to something that moves the needle for the average person struggling with debt. For now, however, the effect of these cuts won’t be very noticeable.”
Did the Presidential Election Have an Impact on the Fed’s Rate Decision?
Although Fed Chair Jerome Powell has repeatedly stated that rate cuts are not politically motivated, this round has been thrown into the mix of a historic presidential election. As for the election having a direct impact on the Fed’s decision, that doesn’t seem to be the case. During the press conference today, Powell was questioned about how Trump’s policies might influence monetary policy and the economy.
In response, he emphasized that the election would not affect the Fed’s decisions in the immediate future, suggesting that the central bank would base its actions on economic data instead. Powell backed this up by stating, “We don’t know what the timing or substance of any policy changes will be,” and “We don’t guess, speculate, or assume.” Powell has consistently pointed out the central bank’s independence, affirming that its decisions are driven by data rather than political considerations.
Wall Street’s Response to Trump’s Victory Followed by a Fed Rate Reduction
Prior to the official announcement of a rate cut, Wall Street was ahead of the game and in full swing due to the election results. As stated by Stephen Dainton of Barclays, “The markets are now trading full-on Trump trade.” Wednesday, the S&P 500 rose 2.5%, which was a record high, while the 10-year Treasury yield climbed to 4.433%. Along with this, the Dow Jones surged 1,500 points, which was marked as the “best day since 2022″.
How did the market fare today after the Fed’s rate meeting? Major stock indexes rose, but with little movement as the S&P 500 posted a gain of 0.7% and the benchmark 10-year Treasury yield declined to 4.341%.
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Mortgage Rates Continue to Shift Upward
Freddie Mac reported that the 30-year fixed-rate mortgage rose in the wake of the presidential election, as well as another Fed interest rate cut. This week’s rate sits at 6.79%, up from 6.72%.
U.S. Weekly Average as of 11/07/2024
Rates may not have been directly impacted by this week’s election results or the Fed’s meeting decision, but they may have been indirectly pushed up by Trump’s win. This is the case because mortgage rates are influenced by U.S. 10-year Treasury bond movements, and this week, bond yields increased in anticipation of Trump’s proposals for higher tariffs, reduced tax rates, and less stringent regulations, which could potentially result in accelerated economic growth, rising inflation, and an expansion of U.S. government debt.
Rising mortgage rates can result in additional monthly expenses for borrowers, often amounting to hundreds of dollars. This increase diminishes the purchasing power of prospective homebuyers, especially considering that property prices continue to hover near their historic peaks. In situations like this, the housing market may lead both buyers and sellers to adopt a “wait and see” approach. A climate such as this presents an ideal time for real estate investors to jump into the game before the market kicks back into gear.
Investors Buying Now Before Housing Market Activity Picks Up
Although mortgage rates are still on the rise, this second Fed rate cut creates a hopeful outlook for future mortgage rate drops. This, coupled with Trump’s win and the effect it could have on the real estate industry and business in general, are causing analysts to predict the housing market may begin to pick up speed.
BH Group President and founder Isaac Toledano had this to say regarding the subject, “I think that the fact that Donald Trump is our next president and people understand that he is pro-business [and] his agenda as far as real estate, I think that a lot of the smart money will continue to be invested in real estate. This is really good news. I think that the momentum is about to change big time.”
With interest rates lowered, the prediction of mortgage rates eventually trending downward, and the effect of a Trump win on the economy, investors are moving forward with rental real estate purchases before the housing market floods and prices rise further. Strategically investing now is a smart move that can potentially save an investor thousands of dollars on a purchase price, as well as increase profits in equity when housing prices do rise.
How to Easily Invest in an Income-Generating Rental Property
Individuals who have a goal of investing in rental real estate before the market shifts once again should utilize the experience of a full-service real estate company that can push a deal through quickly.
Related Article: How to Easily Buy a Rental Property Before the End of the Year
Morris Invest provides new construction turnkey rental properties that are located in lucrative markets and priced at or below market value. The rentals secured through Morris Invest earn 18+% IRR, as well as maximize tax benefits. We place a tenant and assign an experienced property manager to each rental so the client won’t have to take on these time-consuming tasks themselves, and so the cash flow starts immediately. Feel free to contact Morris Invest if you’d like to make your move in the market before prices rise further. In the meantime, you can view the Morris Invest & SDIRA program overview page for more information.
Before you go, dive into this video that covers the housing shortage the U.S. is currently experiencing:
