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September 27, 2024
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September 27, 2024
Get Ready for Blastoff in 2025!
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There was significant anticipation surrounding the Fed's rate cut last week, and now that it has occurred, markets are focusing on predicting the Fed’s next move.
As always, the focus remains on inflation and jobs. The PCE (Personal Consumption Expenditure), the Fed’s preferred measure of inflation, was released today and aligned with expectations. While it doesn't reverse the substantial price increases of the past three years, it signals a positive outlook for the future. Interestingly, the Fed also expressed concerns about potential future negative inflation.
Currently, jobs are the key factor influencing mortgage rates. Employment drives the economy; when people are working, they spend money. Next week is "jobs week," with the BLS (Bureau of Labor Statistics) set to release its job numbers on Friday.
However, the strength of the job market may not be as robust as the Fed indicates. Key observations include:
• Consumers are under pressure from past inflation and high interest rates.
• Most new hiring involves part-time rather than full-time positions.
• Employers are maintaining their workforce but are not increasing hours, waiting to see if conditions improve.
• Small businesses are facing closures at an increasing rate.
• The JOLTS report (Job Openings and Labor Turnover Survey) continues to show a decline.
• The unemployment rate has risen from a low of 3.4% to 4.2%.
• Consumer savings rates have dropped significantly.
• Credit card debt has surged to an all-time high.
• Overall, consumers are feeling the financial strain.
What does this mean for interest rates? Mortgage rates need to continue falling to relieve pressure on consumers. There are underlying issues that may not be fully addressed, and it is expected that interest rates will continue to decline through 2025. Conventional mortgage rates are anticipated to reach around 5.5%, while FHA/VA rates could fall near 5%. These rates will support ongoing movement in the real estate market.
Will real estate values decline if the economy struggles? Unlikely. There will still be buyers who can afford homes with lower interest rates, and the supply of available homes remains limited.
Looking ahead, the rest of 2024 will likely see steady movement through the election and holiday season. By 2025, conditions are expected to improve significantly—get ready for liftoff!
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The information contained is the viewpoint of the presenter(s). Individuals should consult their own financial representative.
Estimated Mortgage Payment is for exemplary purposes only. Contact a licensed loan officer for exact numbers and APR. Additional rates and terms may apply and are subject to change without notice. Loan scenario assumes a purchase price of Zillow's list price and a 10% down payment. Points and fees not included. Property tax, homeowners insurance, mortgage insurance, and HOA fees are approximate and may vary. Other fees may apply. Product displayed is a conventional 30-year fixed rate mortgage using the current average rate as shown on Mortgage News Daily (mortgagenewsdaily.com).
Estimated Qualifying Income assumes a homebuyer has a FICO score above 740, no other credit debt, and a debt-to-income (DTI) ratio of 43%.
For exact numbers and APR or to run a loan scenario based on your own credit and income, contact our office at (858) 259-8700.
Rate Source: Mortgage News Daily. Rates displayed are approximate, subject to change, and do not necessarily reflect rates available to you. MND’s methods involve an objective component based on lenders' raw prices as well as a subjective impression from their network of originators. For more information about how these rates are calculated, visit www.mortgagenewsdaily.com/mortgage-rates/about.
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