Marc Guberti
3 min read
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Real estate investors have navigated quite a few headwinds over the past two years. High interest rates have reduced transactions, and those same rates are prompting homeowners to stay put in their homes. That creates fewer opportunities for people who want to sell properties, and real estate investor Grant Cardone recently sounded the alarm.
Not only do high interest rates make real estate less accessible, but they also make every other type of debt more expensive. The Federal Reserve's high rates result in higher interest payments on credit cards, auto loans, personal loans, lines of credit, and other financial products.
"It's a national crisis," Cardone said when mentioning high interest rates.
Here's why the real estate market hasn't been looking good and what it means for investors.
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Cardone mentioned that mortgage rates are sitting at 8% and are discouraging people from buying homes. Elevated interest rates make the monthly mortgage payments more expensive. While high rates can stem red-hot inflation, the inflation rate has been holding steady for several months.
Higher interest rates made more sense in 2022, but they don't make as much sense now. The Fed anticipates two rate cuts this year that would reduce the total rate by 0.50%.
Reducing rates can boost demand for mortgages and potentially bring up housing prices as a result. Many investors will carefully watch for the Fed's mid-July decision on interest rates. Any rate cuts may create attractive buying opportunities.
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Transactions fuel the real estate industry. Real estate agents have to close property deals to receive commissions, lenders need deals to receive interest payments, and investors have to make deals to expand their businesses.
When the deals stop, the entire industry suffers, and people look for new opportunities. Cardone believes that these past two years have been some of the hardest years for the industries as people grapple with high interest rates and low demand.
