What A Fool Believes
This week’s “Rock” pick, as it relates to current-day economics, is “What a Fool Believes” by the Doobie Brothers. This 1978 pop hit is about how there is no point in reasoning with a deluded fool, and neither you nor the facts will get in the way of what they believe. No wise man can reason away what a fool believes.
I believe this portrays our current Federal Reserve, which continues to pound away at an idea that we need to get to a 12-month average of a 2% inflation rate, which, I have stated before, is virtually impossible to reach in the next 12 months until we begin to see months of negative inflation to average with the previous 12 months. That is just simple math. They seem to be ignoring the other macroeconomic facts:
- The unemployment rate has risen to its highest level since January 2022.
- They believe employment is doing well in the US since the non-farm payrolls rose by over 270,000 jobs last month despite the overall unemployment rate rising from 3.9% to 4%. I would love to see that math…more jobs, but the unemployment rate increases. It is believed that the rise in employment is due to citizens now taking on part-time jobs to make ends meet. It’s not a sign of a robust economy, but why let the facts get in the way of a good story?
- A large part of the inflation calculation is rising auto and home insurance cost. Not sure how keeping rates high will curtail rising insurance cost but it is calculated in the monthly inflation numbers.
- The “core” inflation rate released today for May came in at up .2%…annualized out that is 2.4%…well its close to 2%.
- Consumer debt continues to rise and is currently at an all-time high forcing people to refinance their 3% mortgages to pull cash out to pay off their consumer debt. Refinance applications last week rose 28% on a week over week basis..
Based on their post-meeting comments, where they did not move the Fed Funds Rate, the market is now projecting only one rate cut this year and may not be until the end of the year, which did slow a nice rally to lower levels for mortgage rates today. The possibility of rates heading below 6% by the end of the year is fading…for now. Hopefully, the “Fools” will start looking at the overall economic picture and help those who lost their jobs over the past several months become gainfully employed again.
Is there any good news this week? Yes!! I would say the inflation numbers are a start to somewhat lower rates, and it appears that buyers are coming back into the market after possibly realizing that rates going below 6% are probably not going to happen this year. Furthermore, 30-year fixed-rate mortgages did not go below 6% for the first time since 1971 until March 2022. Somehow, our parents bought their houses at rates above 6%.
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, June 13, 2024
