(To read more on the debt and equity markets, click here.)

MIAMI-With the Federal Reserve raising interest rates for the 17th time in a row on June 29, many in the real estate are questioning how the rate change will impact the real estate market.

In a statement regarding the rate hike, the Federal Reserve said “recent indicators suggest that economic growth is moderating from its quite strong pace earlier this year, partly reflecting a gradual cooling on the housing market and the lagged effects of increases in interest rates and energy prices.”

Among those questioning the future of the real estate market is John Burford, senior vice president and chief economist with the International Bank of Miami. With the central bank raising its lending rate another 25 basis points to 5.25%, Burford sees a rise in both short- and long-term interest rates and a dampening of the real estate market. “Increasing interest rates increases the cost of obtaining financing for both commercial and residential real estate,” he says. “This makes it more difficult for people to buy property at higher prices.”

Burford says the Federal Reserve’s actions, however, are a deliberate attempt to slow the demand for real estate, put a damper of escalating prices and keep a lid of inflation. Thus far, buyers have been able to afford the rising prices in the real estate market because unemployment levels have been low and wages have increased. In Florida, the higher interest rate environment is offset somewhat by the types of buyers attracted to the area. Many hail from the Northeast or other parts of the world where real estate is more expensive and Florida is a relative bargain, he adds.

Burford says the Federal Reserve will pay close attention in future months to economic indicators, such as automobile and housing sales, as it considers whether to raise interest rates again. With signs that unemployment will remain low and wages will rise, Burford anticipates the Fed may raise the rates a few times more before it possibly lowers the rate. “The important thing to note is that rising interest rates reflect a growing economy. Falling interest rates reflect a slowing economy,” he says.

Want to continue reading?
Become a Free ALM Digital Reader.

Once you are an ALM digital member, you’ll receive:

  • Unlimited access to GlobeSt and other free ALM publications
  • Access to 15 years of GlobeSt archives
  • Your choice of GlobeSt digital newsletters and over 70 others from popular sister publications
  • 1 free article* every 30 days across the ALM subscription network
  • Exclusive discounts on ALM events and publications

*May exclude premium content
Already have an account?


© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.



Join GlobeSt

Don't miss crucial news and insights you need to make informed commercial real estate decisions. Join GlobeSt.com now!

  • Free unlimited access to GlobeSt.com's trusted and independent team of experts who provide commercial real estate owners, investors, developers, brokers and finance professionals with comprehensive coverage, analysis and best practices necessary to innovate and build business.
  • Exclusive discounts on ALM and GlobeSt events.
  • Access to other award-winning ALM websites including ThinkAdvisor.com and Law.com.

Already have an account? Sign In Now
Join GlobeSt

Copyright © 2024 ALM Global, LLC. All Rights Reserved.