Groundhog Day?
Since we are in February and we just recently went through “Groundhog Day,” I thought that maybe Punxsutawney Phil and our Warriors of Wall Street might have something in common in predicting 6 more weeks of winter and possibly 6 more weeks of higher rates. Both, if they are correct, will be “painful” but better times are ahead.
The Consumer Price Index was released this week, showing prices at the “core” level rose by .4% while the market was expecting a rise of .3% and the overall rate, for the past 12 months, to 3.9%. Needless to say, our “Warriors of Wall Street” pushed the 10-year treasury north of 4.3% for the first time since the Thanksgiving Holiday, and mortgage rates are once again approaching 7% on fears that inflation is not subsiding yet. I’m not sure what they are thinking since it is not like we have runaway inflation, and if we look back over the past six months, we are still close to the Federal Reserve’s 2% target goal. Regardless of how you look at it, inflation has moved from over 9% to below 4%. There is little to no chance that the Federal Reserve will raise rates this year and most likely will begin a series of cuts this year, which may happen by late spring. But, our “Wall Street Warriors” felt the need to push the 10-year treasury and, ultimately, mortgage rates to higher levels. The other thing is that they only look at the overall number and not what may be driving it to slightly higher levels than their expectations. Take motor vehicle insurance, which is included in the Consumer Price Index number. On average, Motor Vehicle Insurance has risen by 20% on a year-over-year basis. Call me crazy, but I am pretty sure our Federal Reserve policies for tightening and lowering rates have little to nothing to do with car insurance rates. Just wait until they see what the increase in homeowner’s insurance is doing. But it is one component that makes up our consumer price index.
The good news is that this, too, shall pass, and rates will most likely push back below the 4% mark on the US 10-year treasury over the next six weeks, which should take mortgage rates closer to the 6.5% mark. So, like the weather, we will most likely endure a little more pain/cold weather and will also see marginally higher rates for the next several weeks. However, the underlying slowing of the economy and lower inflation are still on the horizon. We will likely be heading back towards the mid-6 % range by mid to late March as our “Warriors” finally realize that the unprecedented Federal Reserve rate hikes over the past two years have truly controlled inflation and“cooled” our overall economy.
Remember… The BEST RATE… IS A LOCKED RATE… with a float down… ask me about our program that allows you to lock your rate and then float down if rates move lower.
Make sure you (or your buyer) get pre-approved before looking at homes so we can determine if you are looking in the correct price range and have you armed to submit an offer with a pre-approval letter!
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Blog post date: Thursday, February 15, 2024
