Interest Rates, September 2024 Rate Cuts, and Groundfloor’s Stock Offering: A Private Credit Catalyst
In this Monthly Market Trends series, we offer you our interpretation of current trends through the eyes of our VP of Market Risk, Patrick Donoghue, and provide you with his balanced commentary so you can make the best investment decisions today for the highest returns tomorrow.
We're also excited to announce our Weekly Market Trends podcast hosted by Patrick, with new episodes releasing every Monday. Take a listen to our latest episode here!
How Groundfloor Empowers Everyday Investors to Participate in the Booming Private Credit Market
The private credit market is surging, growing to an impressive $1.6 trillion. This shift, driven by decreasing competition from traditional banks and increasing demand for alternative lending, is reshaping the financial landscape. As the Federal Reserve considers rate cuts this September, it could accelerate this momentum, positioning platforms like Groundfloor at the forefront of a growing investment opportunity.
The Role of Interest Rates in Real Estate Investing is Obvious
For the past two years, rising interest rates have posed significant challenges for real estate investors. The Federal Reserve’s aggressive rate hikes — which began in 2022 to tame inflation — drove borrowing costs up, slowing down market activity. With mortgage rates hovering above 6%, many investors paused on new projects or slowed down existing developments. However, signs of moderating inflation suggest that the Fed may soon pivot to lowering rates, potentially starting with the Federal Open Market Committee (FOMC) meeting this month.
If the Fed proceeds with rate cuts, it will be the first step toward reducing borrowing costs. Lower rates could create new opportunities for real estate investors, particularly those using platforms like Groundfloor to fund their projects. In this environment, we expect to see a resurgence in fix-and-flip deals, rental property investments, and other real estate projects, as borrowing becomes more affordable.
How Groundfloor Operates in the Private Credit Market
Groundfloor stands out by giving everyday investors direct access to the booming private credit market. Traditionally, private credit has been the domain of institutional players, but Groundfloor is democratizing this space by allowing investors to back real estate projects with as little as $100. This opens the door to a market that PitchBook estimates to be worth $1.6 trillion, with private credit now representing a key avenue for funding in real estate.
In private credit, real estate-backed loans provide a reliable asset class, one that tends to deliver higher returns than traditional public market investments. Groundfloor’s platform specializes in short-term real estate loans for fix-and-flip projects and new construction, offering investors desirable return profiles based on the associated risk of each investment. Better yet, those investments become set-it-and-forget-it with the Flywheel Portfolio, where the true power of diversification optimizes positive outcome.
These investments represent a way for everyday investors to engage with the private credit space, which Cambridge Associates’ Wade O’Brien described as a market benefiting from the “ongoing bank disintermediation” and yielding strong returns. As banks retreat from real estate loans, alternative lenders like Groundfloor are stepping in to meet demand.
Groundfloor’s Stock Offering: Owning a Piece of the Private Credit Boom
Beyond investing in individual real estate loans, Groundfloor offers investors another opportunity: ownership. Through our 2024 Stock Offering on Republic, investors can purchase equity in Groundfloor itself, becoming part of its growth as it continues to scale in the private credit market.
Groundfloor has grown to over 270,000 registered users and manages more than $300 million in assets. This stock offering provides a chance to directly participate in our expansion as we benefit from the broader tailwinds in private credit. By owning a stake or increasing an already existing stake in Groundfloor, investors can profit from both the success of the real estate loans they fund and our ability to capture market share in this evolving sector.
A Dual Opportunity: Real Estate Returns and Platform Growth
For investors, this is a unique moment. Groundfloor provides dual avenues for participation in the private credit space. You can invest in high-yield real estate-backed loans, benefiting from expected rate cuts and increased market activity. Simultaneously, by investing in our 2024 Stock Offering, you become a shareholder in a rapidly growing platform that’s capitalizing on the same market forces driving the rise of private credit.
As the September 2024 Federal Reserve meeting approaches, it’s crucial to consider how rate cuts could unlock new opportunities in real estate investing. Groundfloor’s platform stands ready to help investors take advantage of these shifts, offering an accessible, high-return investment model that aligns with the broader expansion of private credit. Whether you’re funding real estate projects or investing in the future of Groundfloor itself, this is a moment to act.
Have Questions or Comments?
Please reach out to customer support at support@groundfloor.us or 404-850-9223, Monday through Friday, 9am – 5pm EST.