Readers of this blog know that I have been warning that interest rate cuts were probably not coming to the rescue. In fact, since last December I was more or less
convinced that the opposite was true.
We’ve been spoon “Fed” the idea that we’d have four rate cuts this year and mortgage rates would be back down to 4 1/2% - 5 1/2%. When the Fed declined to
cut in January, pundits were sure that they’d cut in March (they didn’t) and again inJune (they won’t). This Wall Street Journal quote from Wednesday, April 10th, after the March FOMC notes were released, tells the story....
“Stubborn inflation pressures persisted in March, derailing the case for the Federal Reserve to begin reducing interest rates in June and raising questions overwhether it can deliver cuts this year without signs of an economic slowdown.”
Anyway, this isn’t about my predictive skills, it’s about YOU, the homeowner.
It’s pretty clear that we are now solidly in a 7-8+ percent mortgage rate world, and will
be through the election. Now I should be clear that these rates are still not historically high. However, as we all know, we’ve lived through two decades of reckless monetary policy where rates were kept artificially low, culminating with Covid and the printing and distribution of trillions of dollars.
Our inflation problems were created by this reckless fiscal policy, started by Arthur
Greenspan and continued by the next 3 Fed Governors. None of them, and certainly
neither political party has had the courage to face the American people and tell us the
hard truth about our country’s finances.
Result: Mad stubborn inflation, that is not going to allow interest rates to come down
for quite a while and might push them higher still.
The ramifications of the situation we now find ourselves in, courtesy of Democrats AND Republicans, have serious implications on the housing market for the next year and beyond. Buyers and sellers will be affected negatively in a variety of ways, but the biggest potential downside will be for sellers, counting on cashing out their home’s ‘equity nest egg’. Here in the Upstate, we may fare better than other areas of the country, but make no mistake, home prices will be impacted.
It will never be more important than it is now to hire a Realtor who understands the economy as well as your neighborhood and can guide you appropriately.
Next week: What’s likely to happen with home prices and why.
Have a great weekend and a terrific upcoming week
Sal Busacca, Realtor
864 952-7251
