As the US Federal Reserve resumes interest rate reductions, real estate shares are one of the areas of the stock market that could benefit from it, and thay have increased in the past few weeks as the markets are increasing a further relaxation of monetary policy.

On Wednesday, the US Federal Reserve lowered its key interest rates for the first time since December and indicated that further lowering woudl follow to support the shaky labor market.

the step of the Fed should benefit interest-sensitive areas such as small caps and cyclical consumer values. Shares of house builders could also benefit if the money policy loosening in lower mortgage interests and more robust business is reflected, which helps the struck housing sector, according to investors.

“The Fed starts the loosening cycle again,” said Angelo Kourkafas, Senior Global Investment Strategist at Edward Jones. “If we think about areas that could benefit from it, housing is one of them.”

Market Reaction and Key Players

“If we think about areas that could benefit from it, housing is one of them.”

The S&P 500 SPX Castle on Friday with an annual increase of over 13 percent to a record level after the Fed reduced its key interest rate by a quarter percent point to 4-4.25 percent. The Small Cap index Russell 2000 had on Thursday RUT A record high for the first time in almost four years.

Some investors hope that the resumption of money policy loosening will give up the economic activity of the economy and the market leadership will expand beyond the large technology companies that have driven the indices upwards.

Der PHLX Housing Index HGX 15 percent increased in this quarter, while the S&P 500 increased by more than 7 percent, even if it was still behind the benchmark stock index in the previous course.

The big winners in this quarter include Dr Horton DHI With an increase of over 30 percent and KB Home kbh and great Brothers TOLthat both increased over 20 percent.The hardware store chains Lowe’s LOW and Home Depot HD have increased by 20 percent and 13 percent in the previous course of the quarter.

the Association of Mortgage Banks (mortgage Bankers Association) announced this week that the interest rate for a 30-year mortgage with a fixed interest rate in the week that ended on September 12th and thus at the lowest level as the beginning of October 2024,while the analysts from Keefe,Bruyette & woods predicted that the mortgage is Could approach 6 percent year at the end of the year.

The Fed’s step to reduce interest rates takes place in the middle of signs of a challenging location on the housing market. Data from Wednesday show that the construction of single-family houses in the USA in August has dropped to a 2-1/2-year low. Fed chairman Jerome Powell described the activity of the real estate sector in a press conference as “weak” after the central bank’s decision.

“If it succeeds in reducing some of thes mortgage interests, this could breathe some life into the real estate market,” said Jack Janasiewicz, senior portfolio strategist at Natixi’s investment Managers Solutions, and added that a reduction in mortgage interest rates into the range of 5 percent was an critically important threshold.

Investors pointed out that a lower FED find sentence may not reduce the mortgage interests to the same extent, since the mortgage interest rates are more on the return of the 10-year-old US treasure office US10Y are bound that are influenced by more general factors. The return on 10-year-old government bonds was recently 4.13 percent,compared to 4.6 percent in May.

The extent of the Fed interest reductions this year is still unclear, since a persistently strong inflation could cause the central bank to further increase interest rates.

In the coming week, the data will throw more light on the housing market, including the sales of existing and new houses.

“A good real estate turnover is generally good for economic activity,” said Paul Nolte, Senior Wealth adviser and MarktSegege at Murphy & Sylvest Wealth Management. “so we would like to see that these numbers are continuously increasing.”

The economic data of the coming week will include an updated presentation of the gross domestic product for the second quarter, reports from the processing industry and the service sector as well as the price index for personal consumption editions, a much -noticed inflation indicator, while investors will also follow Powell’s statements on Tuesday.

Since the central bank determines that it is not on a given path and the FED members are disagree with regard to the expected interest development, “this probably means that there will be volatility among the upcoming economic data – especially in the data on the labor market and inflation,” said Seth Basham, head of stock analysis at Wedbus, in a note.