Give Me Just a Little More Time…
The January 1970 hit “Give Me Just a Little More Time” by the Chairman of The Board could also be said about the US inflation rate hitting the FED’s “magical” 2% mark before we see the FED possibly lower rates. While the Federal Reserve continues to preach about getting overall inflation down to their target of 2% on an annual basis, they also seem to be a little more patient with their comments, probably realizing that a 2% annual rate of inflation from where we have come may take longer than they anticipated due to the averaging of monthly inflation rates.
Given we were above 9% just 18 months ago, it will take numbers very close to 0% to get us to a 12-month average of 2% down the road. While their goal is certainly commendable, the time frame for them to start easing rates back down may need to come sooner as opposed to later of them hitting their 2% target. This accelerated change in philosophy regarding possibly lowering rates may depend on what happens with the unemployment rate. Rumors have it that unemployment is rising, potentially sending the economy into a recession before the election. An unemployment rate of 4% or higher will set off warning bells that our economy is slowing and slowing fast. The Fed will start looking to lower rates gradually if this happens, regardless of where the inflation numbers are at that time. The last FED minutes show a very good chance we will see 3 Fed cuts before the end of the year. While I do not believe we will see my six moves as forecasted initially, I do think four cuts are very possible in 2024, which should bring mortgage rates below the 6% mark for the first time in over 18 months, which should also spark housing sales. Unless inflation breaches below 1% for an extended period of time on a monthly basis, the math does not work to get a 12-month average at or below 2%. An unemployment rate at or above 4% will most likely trigger our Federal Reserve to start cutting rates, which would be the first time in over two years. Just give it a little more time. Mortgage rates should make their move to below 6% by year-end.
Get a realtor when buying and or selling a home. They are worth every penny.
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 28, 2024
