The drivers of sales continue to be interest rate and political policy

Two major forces are currently shaping the real estate market: the Federal Reserve’s recent interest rate cuts and the expected economic policy following Donald Trump’s election to the presidency.

It is expected that these factors will affect the local situation in the future.

The Trump administration’s expectations, especially on tax reform and deductions, will affect the economy positively, benefiting the business sector. Key proposals include corporate tax cuts and the renewal of grants from the 2017 Tax Cuts and Jobs Act, set to expire in 2025.

These changes can stimulate economic activity, boost investment in retail stores, and boost consumer spending. The number of these effects will depend on the speed with which the policies are implemented and the extent to which they are followed.

Other challenges remain, particularly in the proposed trade policies. Critics argue that tariffs could increase construction costs, creating price pressures that could prevent the Federal Reserve from pursuing interest rate cuts.

Another critical aspect of real estate sales is securing the 1031 exchange, also known as the exchange. This tax-deductible investment plan allows investors to defer capital gains while reinvesting in replacement assets.

While critics say the 1031 exchange benefits wealthy investors, it plays an important role in supporting the broader economy.

These changes lead to the creation of direct and indirect jobs across the economy, especially in stores, accountants, title companies, retailers and suppliers. other services. 1031 exchanges also attract significant development funding. On the one hand, policies such as the expansion of the space sector and the continuation of the reduction of the currency can increase investment in the insecure sector and support the business sector.

Interest rates are another important factor that determines the performance of a real estate business. In September, the Federal Reserve began a rate cut, cutting overnight lending rates by 50 basis points, followed by another 25 basis points cut in November. These moves aim to control inflation while operating at full capacity, fulfilling the Fed’s two mandates.

While short-term interest rates, such as the Prime Rate, are directly influenced by the Fed’s actions, long-term lending rates are shaped by broader economic factors such as inflation expectations, employment conditions, and lending. .

The prospect of the new administration’s tax policy has begun to affect the real estate market. Since late October, the 10-year yield has risen by 70 basis points, reflecting concerns about inflation and its impact on mortgages. While these increases bring short-term challenges, the long-term fundamentals for real estate are strong. Although interest rate cuts may not be as quick or deep as previously expected, overall drivers for housing investment remain strong.

Although the full impact of the new administration’s tax policies and the Federal Reserve’s interest rate changes will take time to materialize, there is no doubt that these factors will play a critical role in shaping the future of commercial shopping mall. Investors who focus on the sector’s long-term potential, rather than short-term volatility, will be in the best position to succeed.

Fernando Echeverri is a realtor specializing in commercial investment properties and works at Great Properties International in Key Biscayne. fe@kbrealtor.com or call (305) 458-6101.