{"id":6025,"date":"2024-10-02T08:36:21","date_gmt":"2024-10-02T12:36:21","guid":{"rendered":"https:\/\/www.deeds.com\/articles\/?p=6025"},"modified":"2024-10-02T08:36:23","modified_gmt":"2024-10-02T12:36:23","slug":"who-wins-with-rate-cuts-first-time-home-buyers-or-wall-street-investors","status":"publish","type":"post","link":"https:\/\/www.deeds.com\/articles\/who-wins-with-rate-cuts-first-time-home-buyers-or-wall-street-investors\/","title":{"rendered":"Who Wins With Rate Cuts? First-Time Home Buyers, or Wall Street Investors?"},"content":{"rendered":"\n
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Hopeful home buyers have waited for the Feds to cut interest rates forever. Well, it feels like forever. In September 2024, Federal Reserve Chair Jerome Powell finally did it. It was the first time the Federal Reserve lowered banks\u2019 interest rates since the stimulus days of 2020.<\/p>\n\n\n\n

Anticipating a better economy, mortgage rates are starting to come down. Our economy is returning to normal, the Federal Reserve\u2019s move suggests. That\u2019s good for people who want to buy and sell homes.<\/p>\n\n\n\n

Of course, Wall Street firms love real estate<\/a> when borrowing is cheaper, too. So, who will win after an economic jump start? Ordinary home buyers and deed holders? Big business? Let\u2019s see.   <\/p>\n\n\n\n\n\n\n\n

Where Hopeful Buyers Stand: Ready to Navigate a Better Housing Market<\/h2>\n\n\n\n
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A rate cut is the Fed\u2019s signal that inflation is now under control. We\u2019ve made it past the pandemic era\u2019s financial turbulence. The economy is headed for a \u201csoft landing\u201d and everyone can breathe a sigh of relief.<\/p>\n\n\n\n

Maybe.<\/p>\n\n\n\n

Inflation numbers might be coming down to Earth \u2014 but that hasn\u2019t happened with housing.<\/p>\n\n\n\n

According to HousingWire, <\/em>agents want to see mortgage interest rates drop to 5%. This will create a surge of listings, and keep real estate prices in check. Can the Fed\u2019s new rate cut action get us there?<\/p>\n\n\n\n

At the moment, interest rates are still high enough to keep many would-be buyers sidelined. And that\u2019s not the only problem with high rates. Many deed holders just don\u2019t want to put their homes on the market if they\u2019d be trading in a low rate for a higher one when they buy another home. (Keep in mind that most mortgage borrowers today have been able to finance their homes at rates under 4%. Many of these deed holders refinanced their loans to jump on those low mortgage rates that existed for a time after the Covid-related lockdowns.)<\/p>\n\n\n\n

Today, interest rates on 30-year mortgages<\/a> are down to just over 6%.They\u2019re a full percentage point lower than they were a year ago. So, we are seeing some progress. And interest rates are headed lower still. U.S. Federal Reserve chair Jerome Powell has said further rate cuts will continue into, and through, 2025.<\/p>\n\n\n\n

Will rates ever go back down to ~3%, where they were in 2020 and 2021? Don\u2019t count on it. The Fed chair says it\u2019s unrealistic to expect rates to drop to the bargain-basement lows available back in 2021. <\/p>\n\n\n\n

How low can rates (realistically) go? According to National Public Radio<\/em>, a senior economist at Wells Fargo said the 30-year mortgage rate could settle down to 5.5% by late 2025. That\u2019s not the hoped-for ideal, but at least it\u2019s close to where the agents want rates to be. Even these gradual rate drops can help new buyers get into the housing market. These cuts will also help current deed holders who\u2019d like to sell and move. Plus, with lower borrowing costs, more home builders will get out there and build.<\/p>\n\n\n\n

At the moment, some builders are waiting for more clarity around the election \u2014 \u00a0and the new housing policies to follow. Read more on deed transfers in the run-up to an election<\/a>. <\/strong><\/p>\n\n\n\n

In short: The Fed\u2019s interest rate cuts should boost the U.S. supply of resale homes over the coming year. And that\u2019s good news for the future of our housing market, and those who want in.<\/p>\n\n\n\n

But\u2026<\/p>\n\n\n\n

We\u2019re Not Alone: Corporate Real Estate Investors Want In, Too  <\/h2>\n\n\n\n

Demand is high. Supply is low. Many renters would like to become deed holders, but where are all the properties it\u2019ll take to house them? The big problem is the \u201cmissing middle\u201d \u2014 or the lack of what used to be called starter homes. Smaller homes would sell like hotcakes if the prices were right for younger generations that want them. And corporate players know this.<\/p>\n\n\n\n

So, although interest rate cuts could lead more people to put homes on the market, some of these homes will be snapped up by investor-buyers. As inflation cools and money gets cheaper to borrow, improved \u201caccess to capital\u201d is motivating corporations to accumulate real estate. More on this below.<\/p>\n\n\n\n

The real estate investment trusts (REITs) of Wall Street need to please their shareholders. These entities have bought and refurbished massive real estate holdings across the country. That pits companies against ordinary would-be buyers who can\u2019t compete with big companies\u2019 cash piles. Then the firms rent these homes out to the very people they push out of the market.<\/p>\n\n\n\n

Big corporations control major portions of some of the nation\u2019s most active rental hubs in Florida, Georgia, Texas, Colorado, North Carolina\u2026 And this is one big reason that the Fed’s rate cut won\u2019t be a complete fix for a new generation\u2019s housing crisis.<\/p>\n\n\n\n

Will the Rich Keep Getting Richer? Rental Markets as Profit Hubs for Public Corporations<\/h2>\n\n\n\n

According to the S&P Global Real Estate Monitor<\/em>, many major real estate markets are keeping would-be buyers in apartment leases. Their home prices combined with elevated borrowing rates continue to make deeds out of reach. Corporate investors have been able to profit richly from this reality.<\/p>\n\n\n\n

Here are just a few illustrations of what S&P means:<\/p>\n\n\n\n