Feds Cut Rates Again - Predictions for New Office
Lender · Member since 2024 · 60 posts · 26 votes
Feds Cut Rates Again - Predictions for New Office
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Lender · Ellington, CT · Member since 2024 · 210 posts · 103 votes
1yI think there's a good chance that we will see little movement from the FED to see how the economy reacts to their last cuts and to see how the incumbent president's policies impact the country. My personal opinion is that rates will go down slightly with the recent rate drop and stay there until around March 2025. From there likely a short spike due to the market being more reserved as the policy starts to take hold and lenders opting to raise rates a bit to be on the safe side while the policy settles itself in the new economic environment. I'd predict that by the start of the third quarter next year the FED will have opted to lower by another 25 or 50bps and rates will truly start going down. Cutting down on gov't spending and the pulling jobs back into the US should help offset some of the tariffs, but it will come down to which items exactly do get tariffs put on them and to what degree the tariffs are (10%/20%/50%).
Overall, my guess is that rates will go down for early next year, rise during the middle quarter-third of the year, then fall slowly afterwards. It will certainly be an interesting year though.
7 Replies
- 1yJaron WallingPro MemberRental Property Investor · Indianapolis, IN · Member since 2018 · 4k+ posts · 4k+ votes
Without getting to political I'd say no. Everything that our newly elected president talked about during his campaign trail leads to higher prices. They already replaced the head of the EPA (sorry earth) and now have there eyes on Jerome Powell. They will try to cut the FED prime rate, increase tariffs, and shake up global trade. They have strings to pull and possibly both houses of congress to get it done. Nobody can afford higher prices but the majority of his voters don't understand tariffs, global trade, and basic economics so here we are.
Cash-flow does not fit that equation. Prices need to come down or level out for a long period of time for rent to catch up. Unless you bought RE a few years ago, created equity via successful BRRRR, flip, or do a combination you're just playing the appreciation game.
- Lender · Ellington, CT · Member since 2024 · 210 posts · 103 votes1y
I think there's a good chance that we will see little movement from the FED to see how the economy reacts to their last cuts and to see how the incumbent president's policies impact the country. My personal opinion is that rates will go down slightly with the recent rate drop and stay there until around March 2025. From there likely a short spike due to the market being more reserved as the policy starts to take hold and lenders opting to raise rates a bit to be on the safe side while the policy settles itself in the new economic environment. I'd predict that by the start of the third quarter next year the FED will have opted to lower by another 25 or 50bps and rates will truly start going down. Cutting down on gov't spending and the pulling jobs back into the US should help offset some of the tariffs, but it will come down to which items exactly do get tariffs put on them and to what degree the tariffs are (10%/20%/50%).
Overall, my guess is that rates will go down for early next year, rise during the middle quarter-third of the year, then fall slowly afterwards. It will certainly be an interesting year though.
- 1yMatthew CrivelliBusiness MemberLender · MA · Member since 2021 · 1k+ posts · 1k+ votes
So far the FED cutting rates has made home buying less affordable. They spooked the bond markets causing a sell off in treasuries, that's why since September 15th the 10Y treasury yield has risen by 100bps. (The Fed doesn't dictate mortgage rates) Pray that Trump actually gets a handle on government spending. If this admiration doesn't pull back the reigns, the mortgage rates and inflation will remain high IMO. Some of the talk coming from the Trump camp is promising, specifically Elon musk and the department of government efficiency. (DOGE)
Freedom Capital Funding, LLC523 Reviews - Lender · Member since 2024 · 60 posts · 26 votes1y
Quote from @Jaron Walling:
Without getting to political I'd say no. Everything that our newly elected president talked about during his campaign trail leads to higher prices. They already replaced the head of the EPA (sorry earth) and now have there eyes on Jerome Powell. They will try to cut the FED prime rate, increase tariffs, and shake up global trade. They have strings to pull and possibly both houses of congress to get it done. Nobody can afford higher prices but the majority of his voters don't understand tariffs, global trade, and basic economics so here we are.
Cash-flow does not fit that equation. Prices need to come down or level out for a long period of time for rent to catch up. Unless you bought RE a few years ago, created equity via successful BRRRR, flip, or do a combination you're just playing the appreciation game.
I see what you’re saying about cash flow, and I agree—rising prices are a major challenge for investors and buyers. Even with a lower prime rate, the affordability boost is limited if home prices remain elevated and rents don’t increase proportionally.
For investors, this might be the time to get creative: value-add strategies, BRRRR, or exploring underserved markets where rents still have room to grow might help improve cash flow potential. And while appreciation can be a risky game to play on its own, in certain markets, it's hard to ignore its long-term benefits if you're holding for the right reasons.
- Lender · Member since 2024 · 60 posts · 26 votes1y
That’s a good point about the bond market and mortgage rates. The Fed’s moves often ripple through credit markets, and the jump in the 10Y yield has definitely hurt affordability. If inflation and yields stay high, we might see more buyers sidelined, which could cool demand and stabilize prices. Do you think that could lead to a price correction or just a plateau?
- Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes1yFor now all you are going to see is more of the same because the vast majority of inventory is being held by people with 4-sub 4 rates and they can't/won't want to afford elevated prices and 6+ rates. Until you break that log jam the market is going to largely stay frozen. The only way you can break that log jam right now is severely lowered fed rates, but the level of federal debt is such that they're in a no-win situation because there's going to be little appetite these days for buying 1% fed notes from overseas.
Quote from @Thomas McPherson:
That’s a good point about the bond market and mortgage rates. The Fed’s moves often ripple through credit markets, and the jump in the 10Y yield has definitely hurt affordability. If inflation and yields stay high, we might see more buyers sidelined, which could cool demand and stabilize prices. Do you think that could lead to a price correction or just a plateau?
The fed rates were kept too low for too long. There's now a whole generation of homeowners that need to cycle out of historically low rates to free up that inventory enough to create price drops. Then you have the opposing army of inflation waiting just over the hill to invade when you do. It's just a mess, frankly at least when it comes to the housing market. I think the only way out right now is higher wages that can absorb higher mortgages. It's also what's kept rents stuck where they are, which never really caught up to where they should be with housing prices despite rent price complaints.
Skyline Properties - Scottsdale, AZ · Member since 2019 · 434 posts · 248 votes1y
JD - and with higher wages comes increased consumer demand which leads to higher prices/inflation. This really is an economic pickle. A severe reduction in gov't spending is the only path I see. That, or an actual recession that causes people to take money out of equities and into the safe haven of bonds...
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