Destination Unknown
This week’s musical inspiration comes from the 1980’s hit “Destination Unknown” by Missing Persons. The song speaks of life being so strange when you just don’t know. I believe we are in that type of economy today with the advent of the tariffs going into place and the other countries reciprocating by either adding tariffs on the U.S. and/or even raising what they were already doing to us. The easy thing to see is that everyone is now paying more for imported goods, either coming from or into the U.S.
Classic economics will tell you that these tariffs are a tax and we all will be paying higher for goods not produced and sold here. This behavior can, and most likely will, be inflationary in the short run unless the U.S. companies can produce and deliver the same goods and services at lower prices here. That is an even bigger question as to how U.S. companies will react to pricing domestic products. Will they raise their prices on domestically produced goods since they now can? The door has certainly been left open for them to do so, considering their non-U.S. competition has had their prices raised by 10%, 25%, and in some cases over 50%. See where I am going here? If prices for like items are now being priced higher if they come from outside the U.S., what will U.S. manufacturers do with their prices on similar goods and services now given the opportunity? This certainly paints a possible picture that points to overall higher inflation… maybe? This tariff card has been played many times in our economic history and, in almost all cases, led to a slowdown/recession for our economy. Some would argue even The Great Depression of the 1930s was accelerated by U.S. tariffs.
The ”maybe” here is that potentially higher prices coupled with an American consumer who is “tapped out” in revolving and installment debt may actually slow the economy down enough that inflation will cure itself due to an overall slowdown in the economy, and this could bring rates back down over time and possibly sooner than later. Couple this with huge layoffs from the U.S. Government, and while potentially painful in the short run, may get rates back down to a point where we can once again grow our economy and hopefully learn from our past mistakes. Granted, we have been down this path numerous times and have not learned our lesson but maybe this time we can get it right.
With this said, I do believe you will be hearing the “R” word (recession) more and more over the next several months. As we become more aware that our economy is truly slowing, we should see overall rates begin to retreat to lower levels and possibly see mortgage rates breach below 6% by the end of the summer. My crystal ball is now becoming clearer today and while possibly a little painful getting there, we should see lower mortgage rates over the next several months as the “R” word becomes heard more often.
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, March 20, 2025
