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Bears are still stuck playing defense in this market following the volatility earlier this month. But on Friday, Fed Chair Powell came out and confirmed what we already knew: Rate cuts are coming in September.

To be clear, markets have already priced in these cuts. That’s why we’ve been seeing sectors associated with monetary easing start to outperform over the past several weeks, and if anything, the trend is only accelerating.

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Doom and Gloom Hide Opportunity

Is it just me or is it nothing but doom and gloom on the real estate front from a sentiment standpoint? I understand that inventory levels are starting to rise, but if you’re paying attention, you’ll see that mortgage rates are at the lows of the year, and now hovering in the 6.5% zone.

I think we’ll see mortgage rates drop another 50-100 basis points from here, and once we get below 5% on the 30-year mortgage again, we’ll see a flurry of real estate transactions stemming from FOMO (fear of missing out) on the low-rate environment from years ago.

Keep in mind that this is going to raise the prices of loans issued in the last couple years too. So, financials will have a double-benefit as a result. Their unprofitable loans from 2020-2022 will see some of the losses erased, while the loans issued from 2022-2024 will see their values increase. This could help offset the massive mark-to-market losses that many are concerned about.

It’s certainly a situation worth monitoring, but I keep seeing strength from financials and real estate that tells me help is on the way.

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