Danielle Short On How The Fed Rate Could Be Good For Some Luxury Market Sectors
Photo by Austin Distel
Nevermind the dog days of summer. The U.S. Federal Reserve has moved the domestic and global markets in big ways: It has cut federal interest rates, also known as the federal funds rate, for the first time since the 2008 financial crisis, following a steady stream of rate hikes since 2015. The move would have a trickledown effect that may help “entry-level” luxury buyers and savvy real estate investors, or may encourage more foreign purchasers to look to the U.S.
The federal funds rate is the rate at which banks with balances held at the Federal Reserve, the country’s central bank, can borrow from one another on an overnight basis. While there isn’t a direct correlation between mortgage interest rates and the Fed’s funds rate, which is what’s widely anticipated to be cut at the end of the month, U.S. housing markets stand to feel the impact in a few key ways, especially in the lower segments of the market where first-time and millennial buyers have struggled to get a foot in the door.