The Economy: Mixed Signals and a Look Ahead
I feel like reminiscing to the first time I was financially stable enough to contribute to my 401k. Some may remember this day themselves, some maybe 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 have 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 imply decreasing rates since 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 happening 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)
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 slower than the month previously.
- Other important data: Consumer spending grew “slower”
- Notes on this say it could help bring down inflation, but am I the only one that still read “grew”?
(See Chart below U.S. National Home Price NSA Index)
All kidding aside with my “grew” joke, we do have multiple positive trends of slowdown in the market which in the long run is how inflation is curved 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, Accountant, Financial Advisor, or 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 say the smallest”.
If you have the means and can qualify, I would not recommending sleeping anymore on the thought if 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
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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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