Waiting to see the impact of the latest Fed rate cut before buying a home? Experts predict no short-term relief for buyers — here's why
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After repeatedly hitting new record lows during the pandemic, mortgage rates have been at multi-decade highs in the post-COVID era.
Potential buyers were eager for Federal Reserve Chairman Jerome Powell's announcement of the 0.5% cut to the Fed rate, putting the benchmark in the 4.75%-5% range.
As of September 26, the average 30-year fixed mortgage rate is down slightly but still over 6%. And many experts warn that this long-awaited Fed move may not fix the problem — that the situation for many homeowners may actually worsen.
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A rate cut could mean skyrocketing housing prices
Would-be homeowners are facing even more dire warnings from other experts, including Pulte Capital CEO Bill Pulte and “Shark Tank” star and investor Barbara Corcoran. Both Pulte and Corcoran spoke to Fox Business earlier this year and believe that if the Fed cuts rates, property costs will skyrocket.
"If the federal reserve comes in… and reduces rates… you could see those home prices go up, in my opinion, 5, 10, 20%. That would be just insane. You would start to have a buying frenzy again, much like during COVID," Pulte said.
"If rates go down just another percentage point ... prices are going to go through the roof," she said. Still determined to buy a house? Start saving up for a bigger down payment. The more you can put down, the less you'll have to borrow, which means smaller monthly payments.
Yet, a CNBC survey found 82% of Americans don’t use high-yield accounts, holding only traditional ones instead, growing their wealth at just 0.46% interest. For example, A certificate of deposit (CD) could offer over ten times that return if you invest for a little over a year.
Need help finding one that’s right for you?
With CD Valet – an online CD marketplace – you can shop and compare top certificate of deposit rates from various banks and credit unions nationwide.
Their extensive database shows the most competitive rates without bias, with daily rate updates and earnings calculators that can help you find the right CD to meet your savings goals. ##Buying vs investing in this real estate market
For well-qualified buyers with money to put down who can afford a mortgage at today's rates, it may make sense to jump in now when demand is still constrained by high rates. If Pulte and Corcoran are correct and prices skyrocket when the Fed finally starts cutting rates, you'll gain instant equity.
But, regardless of what the rate is, a large down payment up front isn’t immediately feasible for many people.
Luckily, buying a house isn’t the only way you can gain exposure in the real estate market these days — people are investing instead.
Read more: These 5 magic money moves will boost you up America's net worth ladder in 2024 — and you can complete each step within minutes. [https://moneywise.com/managing-money/how-to-earn-money/money-moves-to-make-right-now?throw=C2HALF_streamline)
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Residential and commercial options
With much lower upfront costs, new platforms are helping eager investors gain access to the housing market by removing financial barriers that kept them on the sidelines.
For instance, Cityfunds lets you invest from hot housing markets in major cities like Austin, Dallas, Miami, Tampa, Denver, Phoenix, and Nashville via owner-occupied residential properties.
They secure an interest in a home’s future value in exchange for cash. As homes’ values appreciate, so does the value of Cityfunds equity investment alongside the homeowner.
So, you can invest in portfolios of these owner-occupied properties for as little as $500 and gain access to a $20 trillion home equity market without the hassle of dealing with high home prices, an expensive mortgage, or the extra work of being a landlord.
And you aren’t limited to residential investments. There is also commercial real estate to consider,, Commercial real estate — which can often involves long-term leases with reliable tenants — is another example of a reliable income stream.
For the accredited investor with a little more liquid capital, First National Realty Partners (FNRP) allows you to access institutional-quality grocery-anchored commercial real estate investments — without the leg work of finding deals yourself.
FNRP has developed relationships with the nation’s largest essential-needs brands, including Kroger, Walmart and Whole Foods, and provides insights into the best properties both on and off-market.
Through FNRP’s secure online platform, you can engage with experts, explore available deals and easily make an allocation, all in one personalized portal.
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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
