All Things Real Estate: Lowering or increasing rates may be a 2-edged sword

All Things Real Estate: Lowering or increasing rates may be a 2-edged sword
Philip Raices

Well, we are now into 2024 and interest rates have come down from the high of 8%+ in 2023, and now according to, 30-year fixed rates w/full doc loans are vacillating in and around 7%-7.9% APR depending on one's income, credit and debt/income ratios as well as the lender.

Fifteen-year rates w/full doc loans are hovering around a low of 6%+ APR.  Many of the expert economists are not 100% confident that they will go down and some even contemplate that they could even still increase, depending on the inflation numbers.

One thing is for sure,  our government says inflation has increased and is hovering around 3.9% in February; affected mainly by consumer spending, supply-chain shortages, and I believe even unemployment.  Their numbers don't convey to me the entire story.

As I have mentioned in previous columns, the Fed inflation formula is the prices of goods and services over time.  As inflation increases so does the CPI, and the value of your dollar (and our U.S. currency) decreases, enabling one to purchase fewer goods and services for the same dollar amount.

The cost of living increases for most, as you need more dollars to buy the same amount of goods and services. This can hamstring the economy by depressing purchasing capability.

However, too low inflation is also unacceptable, because it’s an impediment and restriction on economic growth. More important the current inflation numbers are not representative of and do not include or account for the cost of energy, food, or shelter, which can have a more negative effect on the true inflation numbers, if included.

The Fed says that they are too volatile to be included; but how can we trust and judge actual inflation that we are all experiencing if they are not included?

If we knew the truth, we just might slow down are conspicuous consumption spending habits. More important 70% of our economy is consumer spending; so the government doesn’t want us to stop spending, but possibly to curtail the number of dollars spent.

But isn’t that how inflation can be reduced, by balancing somewhat less spending and decreasing the number of new jobs needed to a more manageable level?  However, you wouldn’t know this by the current credit card debt increasing month over month and the 353,000 jobs that were just created in January.

The next time bomb to drop will be all the mortgages due for refinancing on office buildings throughout the U.S.

The rates probably will double, possibly triple, depending on the debt/income of the properties and the risk to the banks.  The cap rates, profit, and values are being severely affected, due to the Pandemic that caused the exiting of employees to settle into remote and hybrid work environments.

Values have continued tumbling and there will be many more fire sales.  Paying off their current humongous mortgages will be very challenging, if not impossible! Many Hedge Funds and REITS (real estate investment trusts) have been handing over their non-performing properties back to their lenders and have been snatched up at severely discounted prices.

Refinancing just might be moot to consider as there still would be negative cash flow and losses.

Not sure how so many economists, no-it-alls, and prognosticators keep talking about a soft landing! I do hope they are correct, but I am far from agreeing and accepting their statements observing what is continuing to occur in the commercial market. The jury is out and we’ll all see what happens over the next 12-24 months.

If the Fed chair, Jerome Powell does initiate and approve a reduction, how many will there be and what will the total percentage be during 2024?

Even if rates were to go down to 5%, which I seriously doubt, the average renter who would want to buy, may still be shut out of the market, due to the still ever-increasing and high prices of homes and extremely low housing inventory; especially on Long Island as well as in other areas throughout the country.

Unless demand subsides and rates stay the same, I predict that local inventory may take 5-10 years to catch up with the current and future demand for housing. We lack approximately 5-6 million homes to satisfy current demand from those who are entering the market yearly and are capable of purchasing.

For more information: and    Only those who are bringing home a substantial income whether it be as a high-paying executive or self-employed entrepreneur, or possible 2-3 wage, salary or income earners, will be able to save enough for a much larger downpayment.

Only those families will be able to pay the monthly mortgage, taxes, and expenses and be able to purchase a home, multi-family, HOA, condo, or coop.

Unfortunately, everyone else will either be a tenant (possibly for life) or be living with family. Sadly, those 43.2 million students burdened with their substantial debt approaching $1.7 trillion and private student debt of $130.28 billion, are two additional groups that will probably be forever renters unless they can pay down or pay off their obligations. For more information:

The other issue and major dilemma that needs to be addressed is that if and when rates are lowered what effect will there be on reinvigorating and increasing inflation?

Consumers may again go on a continued spending spree with their credit cards adding to even higher more substantial and unsustainable debt levels.  On the flip side, lower rates will allow more qualified individuals and families to buy a home.

According to, the premier go-to source for premium property data shows that Lis Pens (pre-foreclosures) and foreclosures have been spiking from December 2023 through January 2024.

So I do not think we are out of the woods by a long shot.  It’s a real catch-22, damned if we do lower or increase rates and damned if we don’t.

P.S. I am having a contest.  Whoever guesses correctly, how many interest rate reductions and the total percentage reduced will win a dinner with my wife and me and a surprise bonus.

The contest will end on March 31 and the final drawing will be on Dec. 28

The first correct answer picked will be the winner! To be qualified, you must send your answers to [email protected] with your legal 1st  and last name, cell, and email by midnight on 3/31/24.

Philip A. Raices is the owner/Broker of Turn Key Real Estate at 3 Grace Ave Suite 180 in Great Neck. For a 15-minute consultation, value analysis of your home, or to answer any of your questions or concerns he can be reached by cell: (516) 647-4289 or by email: [email protected] or via https://WWW.Li-RealEstate.Com  My New Electronic signature/Bio/Reviews to save to your Cell/PC contacts.  I am the U.S.A. distributor:

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