WHAT THE RELATIONSHIP BETWEEN THE FED FUNDS RATE AND CRE FINANCING COSTS MEANS FOR INVESTORS THIS YEAR
The Federal Reserve Kept Rates Flat In March
- As expected, The Federal Reserve Maintained An Overnight Rate of 5.25%-5.50% in March 2024
- Expectation for EOY 2024 show the Fed believes either two or three 25 basis point rate cuts are likely this year
Rate Cuts Will Not Make Lending Cheaper Overnight
- While the 10-year treasury moves with the Fed Funds Rate generally over the long term, many other factors influence treasury yields
- Heightened treasury issuance could raise 10-year treasury rates, while reducing quantitative easing would have the opposite effect
Investors Should Assess Deals Based on Today
- We can predict the Fed Action this year, but it is harder to predict how those actions will impact CRE lending right away
- Real estate fundamentals are generally strong, and CRE assets will remain a sound investment in 2024
*February
Sources: Marcus & Millichap Research Services, Federal Reserve
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