Fed Cuts Rates by .5 - how should us newbies play this?

Question

Hi BP'rs, I don't have a good sense of how the interest rate cut today will affect me as a new investor looking for my first deal... will it start to drive up prices of homes in areas i'm looking at as money gets cheaper or am I off base?

Greg Scott · Answer

Don't waste any mental energy thinking about what the Fed does.

Find good deals.  Find deals that work based on current mortgage rates.  Find deals that grow your net worth and cashflow.

Mike H. · Answer

I think investors should very much be watching the fed is doing and trying to gauge how that may affect their business or business plans.That being said, lower rates will bring back more buyers for sure. If the rates go low enough, it might bring back more sellers too. People with rates in the high 4's or low 5's may finally be willing to move on from their house if they can find a new rate in the mid 5's. But ultimately, there's one thing that rates can't fix - supply and demand.There simply aren't enough houses for the number of buyers that want them.  And lower rates won't fix that.Prices going up help that a bit because then the premium to buy a new construction home and pre-existing home isn't as great.  If a new construction house costs 300k but a preexisting home costs 275k, that premium might be worth doing. But when you're looking at 340k for new construction and 250 for preexisting it makes it tough.

Its going to be interesting to see how they spur new construction more. Demand is there.  But not at the price gap that currently exists.

Sam Rexford · Answer

Appreciate the response Greg! This def appeals to me :) stick to my plan.

V.G Jason · Answer

If you have to ask, you're the one that's going to get played.

Scott Wolf · Answer

As added insight, we're a direct lender, and we go off the 5 year treasury.  The 5YR has gone up .09% in the past 4 days.  The rates have been coming down since the Fed started talking about dropping them, as the market has been building it in.  Our rates actually went up a little bit yesterday even after the rate decrease.

As mentioned before, I'd focus more on the deal and if it works.

Sam Rexford · Answer

Thank you! Appreciate this perspective!

Sam Rexford · Answer

Thank you! Makes sense. Can't react to everything and change direction with every new head wind. Stick to the plan!

Fed Cuts Rates by .5 - how should us newbies play this?

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