As we approach the 2024 presidential elections, it’s hard to ignore all the noise, particularly if you are in real estate. The real estate market over the last several years has shifted dramatically, creating a seller’s market across many places in the country and a phenomenon called the “lock in” effect, where homeowners with low mortgage rates are holding on to the property in order to not lose the rate. As the elections approach, things are starting to shift slightly, but it’s unclear where exactly this will land us. There are some clues we will go over today.
As of last Friday (August 2nd, 2024) unemployment rates published by the federal government showed an increase of over 0.5% from the year prior, a cardinal sign of impending recession that has been spot on since the 1970s. As a result, many international stockholders have begun selling off stock, causing the US stock market to see a shift downward, many major companies dropping by hundreds of points. How does this impact the real estate market? Well it’s now putting even more pressure on the federal government to drop rates, which was already being considered for the next Fed meeting in September. Many believe that a slash in rates could alleviate some of the country’s affordable housing shortage.
Although I believe a drop in interest rates alone will not fix this problem, I believe a rate cut, in tandem with increased production of affordable housing will create a more tenable environment for new home buyers and anyone looking to get into real estate. A bill proposed by Massachusetts Senator Elizabeth Warren aims to do exactly this, while also restricting private equity companies from acquiring properties and funding more government organizations to assist first time home buyers. Even without this bill, there has been much talk (*just talk*) from presidential candidates about addressing the housing shortage issue, but it’s still unclear which candidate will have a better approach to this.
With this in mind, it’s possible that interest rates will drop throughout the rest of 2024, but we don’t know this for certain. As real estate investors, we’re not depending on this information, but rather trying to make deals work with or without a drop in rates. New homebuyers can take the same approach, no matter how difficult, know that if you can make it in a tough market, you can make it in any market. With a little persistence and experts in your corner, it is still possible to get into real estate.