A New Fed Chairman is Coming Soon—Here’s What Their Potential Low-Rate Policy Will Mean For Investors

Downstream Effects on Homeowners and Residential Real Estate

Buying power improves with lower 30-year fixed rates by reducing monthly payments, allowing buyers to qualify for larger loans, and increasing the buyer pool. Combined with dramatically higher 2026 conventional loan rates, the stage is set for a potentially dynamic real estate market over the next three years. 

Inventory and home prices: The rate lock unlocked

Millions of existing homeowners (including myself) paying “higher” interest rates will have the chance to refinance, freeing up household cash flow and investors to expand their portfolios.  Lower rates encourage homeowners, who have been “locked” into low pandemic-era mortgages, to finally sell and move, boosting market inventory. In turn, increased demand from both first-time homebuyers and “unlocked” movers will likely put upward pressure on prices. 

Impacts on Real Estate Investors: Property Valuation and Returns

Put simply: When interest rates fall, real estate becomes more valuable, leading to higher sale prices when investors exit a deal. If inventory doesn’t rise as quickly as demand, bidding wars could return by the end of summer.

Debt cost vs. property yield

Borrowing costs dropping below the property’s potential income makes every deal more attractive. Dramatically lower rates could have a dramatic effect on commercial and multifamily markets that have struggled in a “higher for longer” environment. 

Strategies for Acquirers and Developers

• Maximizing leverage: Buy-and-hold investors can lower debt obligations and improve cash flows.
• Easier loan qualification: Lower debt obligations improve the debt service coverage ratio (DSCR), making it easier to secure financing for investment properties. Could this be why Rocket Pro recently entered the DSCR space? 
• Construction: Developers get cheaper construction loans and the opportunity to refinance maturing debts, which could add to projects and inventory supply. 

Navigating a Low-Rate Environment

A lower-rate environment created by a dovish Fed means it’s time for real estate investors to prepare for increased competition and higher valuations. The biggest risk is that aggressive rate cuts bring back high inflation, which would force the Fed to quickly hike rates again. Investors must monitor inflation data closely. 

Action steps:  

• Get ready to buy: Line up your financing and target markets, anticipating lower rates. 
• Lock in debt: If you own or buy, prioritize locking in long-term fixed rates to protect yourself from future rate volatility.

Final Thoughts

I have been saying for some time that the Trump administration and the “Commander & Developer in Chief” will prioritize lower rates—potentially much lower than anyone expects. Remember, it was during Trump’s first term that rates hit historic lows during the COVID-19 pandemic. 

How low could mortgage rates go? We think 30-year rates with a four in the front could be possible by mid-to-late 2027.