I feel like reminiscing about the first time I was financially stable enough to contribute to my 401k. Some may remember this day themselves, some may not, whatever. First thing I did was call someone smarter than me when making this decision, my CPA. I truly had no idea what the right answer to my contribution was, pre-taxed or not taxed contributions?
His response did not click with me at the time, but I trusted him completely because of his experience and knowledge of things I had yet to experience. He said, Don’t try to guess where taxes will be in the future.
How is this relevant to the economy?
The middle to end of June had data trends in the right direction for inflation to the point that the feds were reviewing made them feel good and instantly thoughts about possibly lowering rates late in the year by 25 bps! Whoa, we have not heard anything directly implying decreasing rates since the end of February. Even at that time, you could tell they were just trying to buy our attention, could be March, could be June, or wait, maybe May, to not happen this year! (I got dizzy just writing that sentence.)
Fast forward, the last week of June, more housing data was provided to shed light on what we are all watching under a magnifying glass.
On June 24th, the Federal Reserve is likely to keep raising interest rates to fight inflation.
(Fast forward one day)On
June 25th, the data below is released:
- Home prices in America are still hitting record highs! There just isn’t enough inventory.
- But the price hikes are also slowing.
- Silver lining to that, home prices are increasing more slowly than the month before.
- Other important data: Consumer spending grew more slowly
- Notes on this say it could help bring down inflation, but am I the only one who still reads grew?
U.S. National Home Price NSA Index
All kidding aside with my grow joke, we do have multiple positive trends of slowdown in the market, which in the long run is how inflation is curbed and eventually leads to what we all want, lower rates, so we can go spend our fun money again.
Investors are looking at the big picture. If economic data continues to reflect a slowdown, then interest rates MIGHT (not will) be cut later this year.
Bringing this back around to the beginning, when I mentioned my CPA’s response to me. Don’t try to guess where things will be.
You don’t have to be a CPA, an Accountant, a Financial Advisor, or a Real Estate Professional to see what is in front of us all. Home prices are still hitting record highs. New home sales are still up even though they’ve been dropping overall. San Diego saw the biggest jump in home prices this month, while Portland saw the smallest.
If you have the means and can qualify, I would not recommend sleeping on the thought of expanding your real estate portfolio or even just buying your first home. Do not, however, neglect being cautious when making a real estate investment.
I am going to leave you on this last note:
Inflation means the dollar you made yesterday does not hold the same value today. So, if prices continue to climb, no matter how slowly, and your dollar is becoming worth less and less, how likely is it that if, and when, rates drop that you can still afford the same house?
Contribution By our Lending Partners @ American Pacific Mortgage Corporation:
Levi Pollack | Mortgage Loan Originator
NMLS: 1749086 | NMLS: 1850 | Licensed in CO, MA, PA, MI
p (720) 454-6331 | f (719) 466-2198
Oh, by the way, if you know of someone thinking of buying or selling a home who would appreciate the level of service we provide, please call us with their name and contact information.
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