Video
May 31, 2024
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May 31, 2024
Could Interest Rates Go Up Even More?!
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It’s a guessing game right now with rates. There is no clear indication that rates will go down, and there is actually some new chatter that rates will go up. What’s up with that?
The economic indicators that primarily drive interest rates are inflation and jobs. The CORE Personal Consumption Expenditure (PCE), which is the Fed's favorite indicator of inflation, came out today, and it was flat at 2.8%. The Fed's target is 2%. It is being extremely stubborn and not making a lot of progress.
Why would rates go up? Looking ahead to the rest of the year, the PCE is replacing some very low numbers throughout the rest of the year that could actually move inflation up to over 3% by the end of the year. Yikes!
The other driver that could impact rates is the job market. The Fed has a balancing act to keep employment strong and inflation intact. When jobs are lost, people spend less money. Even those who have jobs spend less due to being fearful of potentially losing their job in the future.
If the job market shows cracks, the Fed could potentially start to lower the Fed Funds rate to protect the job market from going into a tailspin. Jobs data comes out next week, so we will be watching closely to see how strong it is.
The wildcard is the U.S. government stepping in and propping up the mortgage-backed securities market. They indicated this will start in June, which will hopefully keep rates stable and potentially move them down.
Despite the persistently high rates, property values continue to increase. The FHFA (Federal Housing Finance Agency) released their House Price Index, which measures appreciation on single-family homes with conforming loans amounts, and it showed a year-over-year increase of 6.7% in March.
Buyers waiting for a crash or for rates to drop will be waiting a LONG time! Make sure to stay education to alleviate fears of making the wrong decision. Indecision leads to no decision. If you know what you are getting into and understand the dynamics of our current real estate market, you can go in with your eyes wide open and PREPARED for the long run.
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