Fed Rate Hike Pressures US Real Estate Market

The U.S. Federal Reserve raised its benchmark interest rate for the first time since 2023, adding pressure to an already struggling real estate market.

The federal funds target range was increased by 25 basis points to 3.75%-4%, a move aimed at reducing inflation that remains above the Fed's 2% target.

With annual inflation at 3.4% in August, the rate hike is intended to support a return of inflation towards its desired level.

Higher borrowing costs will make property acquisitions and refinancing more expensive, particularly for multifamily properties with $875 billion in outstanding commercial mortgages scheduled to mature in 2026.