December 19, 2023
We have had plenty of false starts during the past 18 months or so. Periods in which interest rates either paused or even dropped a little. The latest movement in the right direction seems to not only have lasted longer than most periods, but also has been accompanied by encouraging data on the inflation front. Rates have been dropping for a period of two months now, completely erasing the rise of the previous two months. Thus, we are asking this question – is this the turnaround we have been waiting for?
If you listen to the rhetoric of Federal Reserve Governors, we are not out of the woods yet. But even the Fed’s language has been more moderate lately – as it should be. After all, on an annual basis, the Consumer Price Index peaked at 9.1% in June of 2022. In November of 2023, it was reported at 3.1% and still heading downward. Certainly, the composition of inflation has changed during this time. In 2021 it was energy prices and supply shortages in the headlines. Now the focus is on the cost of housing with a continued focus on wage gains.
Certain market analysts are forecasting that the Fed could be lowering short-term rates as soon as early Spring and certainly if that happens, this would be further confirmation of the turn. Lower rates would be a welcome sign for the real estate market in 2024. Though, if you read most forecasts for 2024, they are expecting a moderate decrease in rates at best. Of course, economic prognosticators have been known to be wrong. Let’s hope they are not wrong about the lower rates, but they are welcomed to be wrong about the amount of the decreases expected. We would like a bit more of a descension.
Source: Origination Pro
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