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With a September Fed rate cut all but assured, real estate has been getting a much-needed boost. Mortgage rates have hit 17-month lows in the residential real estate market, but buyers have been slow to respond. This could be because it is the start of the school year, which is historically a time when many people have already made their housing decisions, or it could signal that potential homebuyers think lower rates are ahead.

Interest rates don't just impact the individual buyer; they can change the dynamics of real estate investing. Ben Miller is the CEO of Fundrise, the largest direct-to-consumer private markets manager, and he is a student of the real estate market. He recently spoke with Bloomberg Radio about the ways that real estate may react to a shift in the lending environment. Miller noted that for the first time in a while, real estate is seeing a "bull market or tailwind" as rates traveled from historic lows to highs that hadn't been seen in a decade.

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Miller explained why high interest rates didn't cause real estate prices to drop. Instead, the opposite has occurred, with existing home sales hitting a record-high median price of $426,900 in June. While that number moderated a bit in July, the lock-in effect of most people having a mortgage under 5% has put a stranglehold on homes for sale in many markets. Like many market watchers, Miller has his opinion of where mortgage rates might land. He said they may land in the mid-5% range, a slightly more optimistic viewpoint than that of Lawrence Yun, Chief Economist for the National Association of Realtors, who has called 6% the new normal. Last week's Freddie Mac Primary Mortgage Market Survey put the 30-year fixed rate mortgage at 6.46%. Miller said that for housing affordability to be where it was a decade ago, you need not only rates to fall but wages to increase, and that takes a lot longer.

The picture for multifamily real estate and the build-to-rent market may be quite different. Currently, apartment supply is reaching new highs because a lot of the current projects were funded during 2021 when interest rates were much lower. While the supply coming into markets is high now, that might not last. Multifamily starts have fallen this year partly because higher interest rates make deals less attractive. Miller sees new construction as falling off a cliff and believes that we could go from an oversupplied market to an undersupplied one in some areas. "It’s very difficult to start a new apartment project because a lender is very reluctant to lend. They’re lending at low proceeds so maybe 55% of the cost of the project and at maybe a 7% interest rate maybe even higher," added Miller.

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Miller is less optimistic about the future of office real estate, pointing out that office real estate has lost between 30%-50% of demand due to the shift in working from home. He sees more fallout for the office sector and the potential for that to negatively impact cities. His prediction is that it will take another half a decade for the bottom to be reached and for cities to determine how to reimagine their downtowns. He also sees technology as playing a larger role in the future of the workplace.

Interest rates are not a magic cure for everything that ails the real estate market. However, for commercial real estate, lower rates, combined with increased optimism around the economy, could pave the way for improvement. However, as Miller points out, not all sectors are created equal, and investors should factor that into their next moves.

This article Real Estate Has A 'Tailwind' Says Fundrise CEO On Interest Rate Shifts originally appeared on Benzinga.com