What does the new Fed guidance mean for real estate?

Question

Pretty straightforward question-

I’m not an economist, but I know that Jerome Powell said something extremely important today!

My little understanding is that the Fed came out with new guidance that they are going to have a higher tolerance for inflation.

I think that means they will keep rates low, it will be easier to borrow money, and therefore we will have above average inflation.

What does that mean for Real Estate?!?!

Dennis Cosgrave · Answer

Powell is definitely encouraging higher inflation. That will mean more money printing which will inflate asset prices. That is good for real estate. The downside is that inflation will permeate through the entire economy making everything more expensive, leaving less disposable income for consumers. That will likely increase downward pressure on commercial real estate as if COVID has not done enough already.

Jeff Copeland · Answer

The primary way the Fed keeps inflation in check to by raising interest rates.

By signalling that they view 2% inflation is an acceptable average, as opposed to a ceiling to be avoided at all costs, Powell sent a strong signal that the Fed is willing to leave interest rates lower, for longer.

Is this good for the real estate market in general? Define good.

Like everything else in economics, it depends.

Many real estate investors (those looking to buy) were longing for the market to cool, in order to see some softening in prices and better cap rates.

But those already holding real estate are obviously happy for the market to keep going up.

What does the new Fed guidance mean for real estate?

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