Today the Federal Reserve announced an increase of .25 bps to the Federal Funds Rate. This is the overnight lending rate banks and credit unions charge each other for short-term lending between banks. The rate hike brings the new federal funds rate to a range of 4.75% – 5%. This is the highest it’s been since 2007. So, why is this important to Real Estate investors? How can it impact us in our businesses and everyday lives?
Higher rates will make borrowing money in traditional real estate transactions more expensive, which drives up monthly payments. In theory, higher rates will also put downward pressure on prices, and should result in lower prices paid for real estate. We have seen a lowering of prices in certain markets in NH, however, it is not widespread as of yet.
How does this impact banks?
The bank & credit union impact will also reverberate to investors. Smaller, local credit unions and banks will experience financial hardship, as many make their money from originating mortgages and loan products for their customers. As rates have increased, demand for these products has fallen. Couple this with the fact that the overnight rate to borrow from each other has increased, and smaller institutions are squeezed financially. Layoffs are starting to take place in the broader banking industry.
In addition, we are seeing an increase in treasury bill and bond yields. Many banks have invested in these securities at lower yields, and as result, we have seen the inability for banks to sell securities they hold. Investors would rather purchase newer bonds with a higher yield. This results in the bank being unable to fund their operations, and ultimately, as seen with Silicon Valley Bank, they become insolvent.
So, what should we do?
Reducing cash positions in the banking system and investing in tangible assets is one of the ways you can begin to protect yourself. Becoming educated on the benefits of putting your money into Real Estate (buying property, or paying off property you already own), or buying gold & silver, or crypto (all of which are up recently) are great ways to help protect your wealth.
If Real Estate investing is of interest to you, please see our ‘Learn more about New Hampshire‘ link below to learn more about the communities we recommend investing in and why.
10X Real Estate is an investment marketplace offering educational resources, investment partnerships, and lists of single and multi-family properties we’ve hand selected as opportunities for investors.
We specialize in identifying single and multi-family investment opportunities. We target the Seacoast, Monadnock, and Lakes Regions of New Hampshire.
If you are ready to invest in Real Estate, contact us today to discuss your goals. Whether you are purchasing your first, or your next investment property, we are here to help!
Or, if you are selling, list your property with a company that has a reach far beyond most. Contact us today.
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