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The Stock Market, Interest Rates, and Real Estate: A Dynamic Relationship

real estate investment risksAs we all know, real estate is affected by the stock market.  The stock market has been rallying, except for last week when the market had one of its worst weeks in several years.  In addition, bond prices fell, signaling the rise of interest rates. Economists have forecasted that the Fed will likely increase interest rates from three to four percent within the next several months.  Interest rates are rising because the economy is heating up and inflation is back in the picture.  In order to hold inflation, the fed raises interest rates to prevent the economy from overheating.

What does this mean for real estate transactions, and specifically the purchase and sale of residential homes?

What Goes Up Must Go Down

Simply put, low interest rates have made it easier for both businesses and people to borrow money.    Lower interest rates stimulate the economy, allowing more people to buy real estate, enter into real estate contracts for residential properties, and businesses to enter into commercial real estate transactions. Lower interest rates make it easier for both commercial and residential real estate sellers to sell properties.  As real estate attorneys, we provide guidance to help navigate you through the real estate transaction and contract, whether you are a residential or commercial developer and/or residential purchaser.

Whether the stock market will recoup and continue to rally at the level that it has remains unknown.  Regardless, the fact that the performance of the stock market and the economy in general influences interest rates and the real estate market remains intact.

Are you a first-time home buyer wishing to purchase your dream home? Or, are you an investor seeking a real estate investment, especially since you are concerned that the stock market may soon not yield the same returns?  Perhaps, you seek commercial properties and wish to maximize their value before interest rates rise?

All of these (and more!) scenarios point to the fact that now may still be the perfect time to purchase real estate … before interest rates rise too much.

Only time will tell if this latest stock market upset is a slight hiccup or if interest rates will continue to climb.

From the trenches,

Roy Oppenheim

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