The Fed Can Cut Rates and Real Estate Can Still Feel Worse

 

 

The Fed can cut rates and real estate can still feel worse.

Because your deal doesn’t price off the Fed Funds rate.

It prices off the 10 year treasury. It is a market price.

When the 10 year rises, here’s what changes in the real world:

- Heavy value-add and development math gets squeezed
- Cap rates don't necessarily have to move, but desired returns do.

Even the retail buyer feels it. Monthly payments stay higher and affordability stays very tight. And sellers will have to compete more.

If the long end is rising, the market is telling us something. It still wants a premium for inflation risk, duration risk, and the sheer amount of exponential debt expansion out there.

Anyone waiting for the Fed to “save the market” isn’t underwriting the deal in front of them, more likely they’re hoping a bailout is penciled in.

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