Real Investor Radio

Episode 47 | Interest Rates: Real Estate Strategies and Fed Uncertainties

July 1, 2024

Episode Summary:

In this episode of Real Investor Radio, Craig Fuhr and Jack BeVier discuss the current state of interest rates and the potential impact on real estate investors. They address the uncertainty surrounding the Federal Reserve’s rate cuts and the market’s loss of faith in the Fed’s ability to drive inflation down to 2%. They also explore the role of the Fed in the mortgage market and the challenges of predicting interest rate changes. The conversation highlights the importance of owning real estate as a hedge against inflation and the potential benefits of investing in hard assets.

Overview of Episode 47

Craig Fuhr and Jack BeVier discuss the current uncertainty surrounding interest rates. Many investors hold off on loan decisions, waiting for the Fed to reduce rates, though no cuts have occurred yet.

Fed’s Rate Promises and Market Reaction

Initially, the Fed hinted at rate cuts in 2024, boosting investor optimism. However, persistent inflation data has slowed this momentum. As inflation numbers remain high, confidence in the Fed’s ability to reduce rates dwindles.

Market Response to Rate Speculation

Jack notes that the mortgage market often reacts independently from the Fed’s moves, especially with prolonged inflation. Accordingly, even if the Fed cuts rates slightly, it may not impact long-term rates or mortgage rates immediately.

Election Impact on Interest Rates

As the election approaches, Craig and Jack predict limited rate cuts, possibly one small adjustment for political reasons. However, they doubt that cuts will significantly affect Main Street investors.

Real Estate as an Inflation Hedge

Jack and Craig advocate real estate as a reliable investment amid rising interest rates. Residential real estate adjusts annually with inflation, making it an effective hedge in volatile markets.

Silver Lining in Higher Interest Rates

Although high interest rates strain investors, Jack views them as an opportunity to secure long-term real estate investments. Even with high rates, he believes real estate assets will benefit from inflation-adjusted rent growth over time.