Fed slashes interest rates. Will it move the needle?

The best national real estate stories from The Real Deal Sep 21, 2024 [View in Browser]( | [$1 for 1 Month]( [The Real Deal Logo](   [The National Logo](   In this week’s newsletter, we look into the Fed’s decision to cut interest rates by 50 basis points and how it will impact the market. Plus, Ben Ashkenazy and Raymond Gindi finally settle their dispute, another company backs out of a lease in South Florida and Joe Chetrit suffers another setback. These stories and more below.   Fed slashes interest rates. Will it move the needle? There’s always that moment when you get caught in a storm; when you catch a glimpse of sunlight and need to decide whether to make a run for it or wait it out. The Federal Reserve saw it too and made its dash by [cutting interest rates by a half-point]( this week, bringing the federal funds rate to between 4.75 percent and 5 percent. A rate cut was widely anticipated, but the larger-than-expected half-point reduction has left the real estate industry buzzing with questions: Will this be the boost that residential and commercial markets need, or will the storm remain? Mortgage rates, which aren’t tied directly to the Fed’s interest rate, had already been falling in [anticipation of a reduction](, with the average 30-year fixed mortgage rate down to 6.09% as of Friday, according to Freddie Mac. With the Fed’s decision now official, mortgage rates are [expected to drop further](, likely spurring more buyer activity and breathing life into the housing market. While a 50-basis-point cut is good for the market, it’s not a silver bullet. Housing experts warn that lingering challenges like political uncertainty and the cost of construction could continue to put pressure on the industry. And one of the biggest barriers to growth remains the [severe lack of inventory](, something Fed Chair Jerome Powell himself acknowledged, noting that inventory “is not something the Fed can fix.” While residential markets are starting to feel a sense of optimism, commercial real estate is more of a mixed bag. Since the Fed began raising rates in 2022, CRE’s office, retail and [multifamily sectors have struggled]( with tightening capital markets and rising operating costs. RXR CEO Scott Rechler recently called commercial real estate a [slow-moving train wreck]( and rebuffed the industry’s “Survive ‘till 25” mantra, offering instead: “Survive through ’25. The fix will come in ’26.” Rechler warned of a “[new paradigm](” as the market adjusts to a lower-rate environment and said the coming months and years will involve recalibrating both values and capital structures, especially in sectors like multifamily. The rate cut offers some breathing room for multifamily investors, especially for those dealing with floating-rate debt. Adam David Lynd, CEO of the Lynd Group, called the rate cut a “[positive step for multifamily](” but emphasized that these adjustments alone won’t fix the broader value problem in commercial real estate. Looking ahead, lower rates could open up refinancing opportunities for distressed commercial assets, providing more liquidity and potentially staving off foreclosures. But as Ben Jacobson of Forman Capital pointed out, the rate cut is unlikely to have a significantly positive effect on commercial real estate in the short term, as other costs remain high and market conditions remain uncertain. For now, the market is in a state of cautious optimism. The Fed’s move signals a shift in policy, but whether it can truly move the needle remains to be seen. As it stands, the industry is still left wondering: Has the storm passed, or is this just a short respite until the next downpour?   Together with Entrata AI layered throughout your property management system [Entrata]( Change the way you work with ELI+ (Entrata Layered Intelligence). ELI+ gives you access to cutting-edge AI modules that can take care of processes from start to finish. It’s trained exclusively on the data you put into the Entrata system, so you’ll experience more efficiency, greater accuracy, and higher quality outputs across the leasing journey.   [I'm an image]( Ben Ashkenazy, Gindi family finally settle epic feud Ben Ashkenazy and the Gindi family have settled one of real estate’s most contentious legal battles. [I'm an image]( Rothschild pulls plug on 830 Brickell office Financial services firm Rothschild & Co won’t be opening at the 830 Brickell tower, marking the third company that leased during South Florida’s boom to scrap its planned office. [I'm an image]( Joe Chetrit defaults on 1,300-unit Two Bridges dev site In the latest setback for Joe Chetrit, the developer is in danger of losing his planned 1,300-unit apartment project in Two Bridges.   Advertisement   [I'm an image]( Homeowners sue @properties, top broker Leigh Marcus over alleged squatter Homeowners claim they weren’t aware of dual representation between the broker and a dud tenant of their $2.2M North Center home. [I'm an image]( What regular people can learn from real estate pitch decks Econ 101: GFI report highlights the lack of new hotel supply in NYC boosting room rates and occupancy. [I'm an image]( Developer occupies Calabasas site in protest to block county auction LA officials are said to have scheduled an auction for a 27-acre site atop the Calabasas hills, but the owner of the site is refusing to budge. [I'm an image]( “Miami has jumped the shark”: Analyzing South Florida’s office sales slump Deals are down from the recent boom years and the calmer 2018 and 2019 before the pandemic-induced flurry.     [The Real Deal Logo]( [Facebook]( [Twitter]( [Instagram]( [LinkedIn]( [YouTube]( [Manage Newsletters]( | [Unsubscribe]( | [Privacy Policy]( | [Subscribe]( | [Advertise]( The Real Deal 450 West 31st Street, New York, NY 10001 ©2024 TheRealDeal. All rights reserved. [View Online](