Interest Rates, GDP, and the Housing Market: A Strategic Outlook for Gulf Coast Real Estate
By Meredith Amon
Licensed in Alabama & Florida | Gulf Coast Real Estate Advisor
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In luxury real estate, timing the market is about more than just watching listing trends. It requires understanding the deeper relationship between macroeconomic forces—like GDP growth and monetary policy—and the local housing market. As someone who lives and works on the Gulf Coast, I watch these signals closely because they directly shape the behavior of buyers, sellers, and lenders alike.
This year, the conversation has turned sharply toward interest rates, inflation moderation, and political pressure to stimulate economic growth. And with President Donald Trump currently in office, there is renewed energy behind proposals to ease interest rates in tandem with economic slowdowns—a move that could have a profound impact on real estate.
The Link Between GDP and Housing Demand
Historically, Gross Domestic Product (GDP) and the housing market are closely correlated. When GDP grows, so does employment, disposable income, and consumer confidence—conditions that naturally drive real estate activity. Conversely, when GDP contracts, the housing market typically cools due to reduced affordability and tighter lending.
We saw this correlation play out in early 2025, when real GDP posted a 0.3% annualized decline in Q1, according to the Bureau of Economic Analysis. That decline came amid elevated interest rates, cautious consumer behavior, and declining new home starts.
This kind of contraction often creates pressure on the Federal Reserve to recalibrate interest rate policy—particularly when it begins to constrain growth sectors like residential investment.
President Trump’s Policy Focus: Stimulating Growth Through Lower Rates
President Trump understands this relationship. His administration has made it clear that restoring GDP growth—and reviving the housing market as a core engine of that growth—is a top priority.
Public statements and economic messaging from his administration have emphasized the importance of reducing borrowing costs to unlock real estate, infrastructure, and consumer-driven expansion. We are already seeing signs that Trump is urging the Federal Reserve to act swiftly in lowering rates, framing it as essential to restoring economic momentum.
If those efforts are successful, they could realign monetary policy with a more growth-focused trajectory, which historically results in a drop in long-term interest rates—a scenario that could renew buyer activity across high-value markets like Ono Island, Orange Beach, Gulf Shores, and Perdido Key.
Current Rate Environment: Still Restrictive
As of May 2025, the average 30-year fixed mortgage rate is hovering around 6.81%, with jumbo and second-home loans frequently landing above 7%, depending on terms and credit.
This has been enough to suppress demand in several coastal second-home markets, particularly where cash buyers are holding out for improved leverage. In a normalizing environment, even a modest drop—say, from 6.81% to 6.00%—can recalibrate affordability by tens of thousands of dollars on a standard conforming loan.
My Forecast: A Target Rate of 6% by Fall 2026
Based on current economic signals, monetary policy trends, and the political will to support GDP expansion, I anticipate we will see rates fall to approximately 6% by Q3 or Q4 of 2026.
Here’s why:
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GDP contraction will trigger pressure on the Fed to ease
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Inflation appears to be stabilizing at levels that permit a softer stance
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The Trump administration is signaling aggressive pro-growth policy alignment
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Pent-up demand in real estate is ready to re-engage once financing becomes more attractive
This will particularly impact turnkey new construction offerings, vacant land sales, and premium resale properties across the Gulf Coast.
Final Thoughts
Rates aren’t just numbers—they are the product of national policy, global capital flow, and economic momentum. When you understand that, you can act proactively instead of reactively.
Whether you’re building, buying, or listing, I’d love to help you craft a strategy that aligns with both local market knowledge and the macroeconomic forces shaping our future.
Meredith Amon
Licensed in Alabama & Florida | Bellator Real Estate
Ono Island Homeowner | Gulf Coast Real Estate Advisor
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