The Heat Is On
This week’s “pop” hit, as it relates to our current economic news, is the 1984 Glenn Frey hit “The Heat Is On” and the HEAT is now really on the Federal Reserve since much of the economic data being released recently is not pointing to an “expanding economy”. I have stated in several of my articles that the 2% inflation target set forth by the FED before they thought of cutting rates was simply not achievable from a mathematical perspective, as well as what the damage of waiting would do to the economy. I have said that the FED needs to consider all aspects of the economy, such as the following headline news topics:
- Unemployment is at its highest point since October of 2021.
- Bankruptcies are up 28% year to date.
- Home sales are flat to slightly lower year to date.
- Payroll Growth continues to fall.
- Consumer debt is at its highest levels in history.
- McDonalds, Wendy’s, Taco Bell, and Burger King are all running “specials” to reduce prices to consumers as same-store sales continue to fall on a month-to-month basis.
Well, it appears that Fed Chairman Powell and his band of Fed Members may be changing their tune as the Chairman stated that they may consider easing monetary policy if they gain greater confidence that inflation is “heading” towards 2%. Now, “Heading” toward 2% is a far cry from stating it must be at 2% or below, as they have clearly stated in the past several months. These comments now have Wall Street looking for a potential cut as soon as September and maybe another one before the end of the year. There are others who believe that due to further weakening economic data, they could cut up to 3 times this year. While the 3 cuts are an outlier, don’t count it out if unemployment continues to rise over the next several months, coupled with headline inflation numbers dropping below 3%. If we were to get two FED cuts this year, we should see mortgage rates closer to 6.5% or lower to start 2025.
The good news is that while it may have taken them longer than it should have, it appears the FED is finally looking at the MACRO economic picture as opposed to focusing on just one component. Lower rates are on the horizon!
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, July 11, 2024
