In the current economic situation, the Federal Reserve has launched a new round of easing with a 50 basis point interest rate cut, which has attracted a lot of attention. This action not only has a significant impact on the US economy and the global economy, but also brings a series of chain reactions to the US real estate market and related industries. At the same time, market liquidity and government policy regulation are closely related to the real estate market in this economic context, and many details are worth in-depth analysis.

1、 The macroeconomic impact of the Federal Reserve's interest rate cuts

（1） The impact on the US economy

The Federal Reserve's interest rate cut this time aims to stimulate US economic growth, promote employment, and help the economy achieve a soft landing by lowering interest rates. This decision has an important guiding role in the trajectory of the domestic economy in the United States and is expected to inject new vitality into economic development.

（2） The impact on the global economy

From a global perspective, the Federal Reserve's interest rate cuts have a wide-ranging impact. On the one hand, it reduces the negative spillover effects of US monetary policy on other countries, such as exchange rate depreciation, capital inflows, and capital market fluctuations, which can be alleviated to a certain extent. On the other hand, this interest rate cut also provides a reference for central banks of various countries to adjust their monetary policies. In this week's global "central bank super week", except for the Bank of Japan, which remained inactive, other central banks are likely to announce interest rate cuts. The European Central Bank has even rushed to announce interest rate cuts twice in advance, which shows its far-reaching impact.

2、 Direct impact on the US real estate market

（1） Stimulating the demand for home purchases

After the Federal Reserve significantly lowered interest rates, it significantly reduced the loan burden on homebuyers. Taking a house worth $500000 as an example, if the loan interest rate before the interest rate cut was 5%, the buyer would repay approximately $2684 per month; After the interest rate cut, assuming the loan interest rate drops to 4%, the monthly repayment will be reduced to about $2421, and the monthly repayment burden will be reduced by nearly $263. The significant reduction in burden has led to a surge in demand for housing among those who were originally in a wait-and-see state, as they flock to the real estate market. According to historical data, after several interest rate cuts by the Federal Reserve, the average demand for home purchases has increased by about 20%. As a result, many first-time homebuyers and young families have seen opportunities to realize their housing dreams and actively engaged in the search for suitable properties.

（2） The trend of changes in housing prices

In the early stages after interest rate cuts, housing prices usually show an upward trend. This is due to the influx of more homebuyers leading to a sharp increase in demand, while the supply in the real estate market is difficult to keep up quickly in a short period of time, and the imbalance between supply and demand is driving up housing prices. However, changes in housing prices are not absolute. If consumers hold a pessimistic attitude towards the future economic outlook, they may choose to wait and see, leading to a decrease in market activity. For example, in the current economic situation, although interest rates have decreased, some consumers are concerned that economic recession may lead to unemployment or income reduction, so they are cautious about buying a house. In this case, the effect of interest rate cuts may be offset. From historical data, after several interest rate cuts by the Federal Reserve, housing prices have generally experienced significant increases, but there are also some exceptions. In certain specific economic environments, housing prices did not immediately rise, and even fluctuated.

3、 Chain reaction on related industries

（1） Changes in the US Home Furnishing Market

After the Federal Reserve cut interest rates, the US home market has ushered in new changes. From the perspective of inventory growth rate of furniture and home furnishings wholesalers in the United States, the growth rate turned negative in April 2023 and fell to -16.56% in September 2023, and then the decline gradually narrowed. As of July 2024, the monthly growth rate has converged to -5.74%, indicating that the destocking cycle of furniture and home furnishings in the United States is approaching its end. With the arrival of interest rate cuts, the demand for household goods is increasing, and the replenishment cycle is expected to begin.

According to data from the General Administration of Customs of China, the total export value of furniture and its parts in China reached 44.893 billion US dollars from January to August 2024, an increase of 9.9% compared to the same period last year. The total export value in August was 4.842 billion US dollars. In terms of product categories, the growth rate of export value for sofas, mattresses, and flooring has improved since the second half of 2023. The export growth rate of most sub categories has turned from negative to positive in the first quarter of 2024, showing a significant improvement. As of July 2024, mattress and some sofa types still maintain a double-digit growth trend.

From the inventory to sales ratios of furniture retailers and wholesalers in the United States, the inventory to sales ratios in July 2024 were 1.54 and 1.89, respectively, ranking in the 34th and 78th percentiles of the past decade. Retailers' inventory is in the historical low range and there is a demand for replenishment, while wholesalers' inventory sales ratio is in the historical high range and still needs further destocking. After the Federal Reserve initiates interest rate cuts, the inventory to sales ratio is expected to further improve, leading to a replenishment cycle. The Fed's interest rate cuts are expected to drive the growth of China's furniture exports, and China's furniture exports are expected to continue to maintain a high momentum in the second half of 2024.

（2） Opportunities and Challenges for Real Estate Developers

For real estate developers, the Federal Reserve's interest rate cuts have brought both opportunities and challenges.

In terms of opportunities, American developers with short development cycles, low land cost ratios, and a focus on current home sales are expected to benefit from the housing demand released after interest rate cuts. Firstly, the low interest rate environment reduces the financing costs for developers. For example, a medium-sized real estate developer's financing cost before the interest rate cut was an annual interest rate of 6%, which may decrease to 4.5% after the cut. For a project worth $100 million, it can save millions of dollars in interest expenses annually. Secondly, the increasing demand for home purchases has brought more sales opportunities for developers. With the decrease in loan interest rates, more homebuyers are entering the market, the speed of property sales is accelerating, inventory is decreasing, and developers can adjust their sales strategies according to market demand, increase housing prices or launch more high-end real estate projects to obtain higher profits.

However, developers also face many challenges. On the one hand, land costs may rise with increasing demand for home purchases. In some popular areas, land competition is fierce, and developers may need to pay higher prices to obtain suitable land. On the other hand, market competition may also intensify, and more developers may enter the market to compete for limited land resources and homebuyers, which may lead to price wars and competition in project quality, putting pressure on developers' profitability.

4、 Market recovery? Liquidity is recovering

Media reports indicate that market liquidity is currently recovering in various ways. More companies are willing to provide loans for the purchase of commercial real estate, such as Michael Gigliotti, Senior Managing Director of Jones Lang LaSalle Inc., who stated that an investor planning to acquire a Florida warehouse real estate portfolio and seek $120 million in financing has received 12 offers from major banks and insurance companies, up from four to five offers three months ago.

In addition, investment giants are also preparing to provide certain loans, although the interest rates are higher than a few years ago. Fortress Investment Group and Goldman Sachs Group Inc. are seeking to raise funds from investors for a new commercial real estate loan real estate investment trust fund. According to CEO Robert Wasmund, Ascent Developer Solutions, a lender supported by Elliott Investment Management, stated that loan demand has doubled compared to two to three months ago.

Data shows that the commercial mortgage-backed securities market has regained vitality since the beginning of this year, with new issuances reaching $92.5 billion as of July, a 57% increase from the same period in 2024. Madison Realty Capital has secured a $2.04 billion equity commitment for its real estate debt fund, which fully demonstrates the gradual recovery of market liquidity.

5、 The impact of government policy regulation on the US real estate market

The government's policy regulation also plays an important role in the US real estate market. Real estate tax, as an important source of revenue for governments below the state level, may affect the real estate market by adjusting real estate tax policies. For example, by increasing or decreasing the real estate tax rate, it affects the holding cost of property owners, thereby affecting the market supply and demand relationship.