Rates have been all anyone has focused on since we hit record lows in 2020! Let’s be real, that’s a once in a lifetime opportunity we know will never happen again, so for those of us who got it, congratulations!
Since late 2021 rates have been climbing and seeming like there is no limit to how high they will go because the feds are doing their best at “trying to curb inflation”.
Over 2022 and 2023 every economist had an opinion on when our market will shift, and rates will come down. From beginning of 2023, to end of 2023 to beginning of 2024. Though economists must always look at the history of the market and always plan for the worst, it seems none of them listened when the feds were discussing what they are doing and what they are looking for.
What are the Feds looking at? They closely monitor the CPI (Consumer pricing index). Which is a key measure of inflation, this tracks how much the prices of everyday goods and services have changed over time. Consumer spending is a good thing, but too much of it is when the Feds try their hardest to keep inflation under control. HIGH CPI is caused when everyone is suddenly trying to buy the same thing at the same time, this causes prices to rise rapidly! (Remember how spending went in 2020 for most people?) On the contrary, if CPI is too low, it reflects that inflation is too low.
This leads the Feds to lower interest rates, making borrowing money cheaper to stimulate the economy and bring inflation closer to its target of 2%.
This is how they establish the “overall health of the economy”. Over the past two years especially we have noticed a little bit of a slow in real estate. Not how millennials might dream of with a price crash.
Homes statistically speaking are still appreciating but not in a manner as in 2021 when every house was sold at $100k over the market value, driving up prices exponentially because money was cheap to borrow, leading to where we are at today. As much as we all want to say “unkind” words to the feds and their interest rate decisions, what they have been doing is working. Acting as a referee making sure economic growth is played fairly and prices do not get out of hand.
With that said, this year the Feds implied maybe March, then in April pushed and said maybe June. No one has a crystal ball to tell you exactly when the feds will be cutting rates, but this last report of the CPI reflected a 1.6% increase in labor productivity that could help insulate the U.S. and influence the Fed’s rate cut decision this year. Hopefully in May we can get a little bit more clarity on their decisions for our market’s future.
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.
As always, thank you for your business and continued support!