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The American Central Bank (FED – Federal Reserve) cut the interest rate by 0.5%, from 5.4% to 4.9% per year, on Wednesday the 18th. It is the first fall in American interest since 2020. The decision has a direct impact on the American real estate market, as we have already been warning in this blog. In this article we explain how this decision can influence your investment strategy in Florida. Keep reading to understand!
Why did the FED cut interest rates?
The FED had been keeping interest rates high in the US with the main objective of containing inflation. It turns out that, recently, employment indicators in the US have worsened, which could signal the beginning of a recession.
At a press conference, Fed President Jerome Powell recalled that the American Central Bank aims to “maintain the solidity of the economy and the labor market”. In this context, Powell argued that inflation is controlled and close to the 2% target, which would no longer justify interest rates at the levels they were.
At the same time, risks related to American employment have increased. The interest rate cut, in this scenario, also aims to stimulate the economy.
Will interest rates continue falling?
Contrary to what many analysts imagined, Powell adopted a neutral and less aggressive position with regard to new cuts.
The president of the FED made a point of highlighting that there is no hurry: “Nothing in our forecasts suggests that we are in a hurry,” Powell said. “We can go faster or slower or stop the interest rate reduction, if appropriate.”
There is therefore no sign of declared bias, as expected. Powell even insisted with the press that future decisions will be made at each meeting, after analyzing macroeconomic data for the period.
Most analysts expect, however, another 0.5% cut by the end of the year.
What is the impact on Florida’s real estate market?
The interest rate cut has generated expectations about the impact on the real estate market, especially in regions like Miami-Dade. However, experts warn that the effects of this decision will be gradual, with no immediate changes.
Heloisa Arazi, broker and owner of AMG International Realty, a real estate agency in Miami and Orlando aimed at the foreign public, warns that this may be an ideal time to invest in real estate in Florida. “More people will buy real estate, since the cost of real estate financing will decrease. This increase in demand has a direct impact on real estate prices,” says Heloisa. “Now is the time to buy while prices are still affordable and take advantage of the appreciation potential.”
According to Heloisa, a common mistake of many investors is to wait for interest rates to fall and then buy the property. “Waiting for the interest rate to fall may be too late, since it is a common strategy,” she argues. “The idea is to buy a little before the fall and opt for a financing contract with floating rates,” she explains. In this way, the investor takes advantage of the attractive prices and, when the interest rates actually fall, they will have the benefit of lower rates, since the contract is floating.
“At this moment the interest rate fell only 0.5% and everything indicates that there will be new cuts. The impact on the real estate sector has not yet happened, but we will soon feel it,” predicts Heloisa.
About AMG International Realty
AMG International Realty is a global real estate agency specialized in Florida and aimed at the foreign public. If you want to know more about the real estate opportunities in the market of Miami, Orlando and cities around these two centers, contact me right now and contact me: +1 305 761 2655 (Heloisa Arazi).
