‘What a difference a day makes.’ A popular song years ago but it’s not really a day … it’s more like eight weeks as far as home borrowing costs are concerned.
At the end of October, the 30-year fixed rate mortgage hit nearly 8% and many pundits were calling for even higher rates. But what happened? Easing inflation and a pivot from the Federal Reserve from rate hikes to a rate pause, to rate cuts coming as early as March of 2024 have been the catalysts for falling home borrowing costs. That’s a quick Fed pivot.
A Fed pivot refers to “a significant policy shift by the U.S. Federal Reserve (Fed), the central bank of the United States, in response to economic conditions“.
On the inflation front, the Fed’s favorite inflation gauge, the Core PCE, has fallen to an annual rate of 3.4% from 5.6% in February 2022. The widely watched Consumer Price Index hit 9% in June of 2022 and has fallen to near 3%. So, the rate of inflation is falling but prices are still up year-over-year, just at a slower pace. The Fed’s target level is 2% annually. Lower inflation is a positive for both the bond markets as well as borrowing costs.
Across the globe, inflation pressures are also easing.
At the December Federal Open Market Committee meeting the central bank held the short-term Fed Funds Rate steady and the monetary policy statement read, “Recent indicators suggest that growth of economic activity has slowed from its strong pace in the third quarter. Job gains have moderated since earlier in the year.” At his press conference, Fed Chair Powell signaled that the Fed doesn’t need a recession to cut rates and conveyed a dovish stance, essentially meaning lower rates.
Bottom line: With recent reports showing home price growth slowing, the supply crunch easing and lower borrowing costs, 2024 could be shaping up to be a solid year for housing. Home buying will always be constant with new home buyers, those looking to upgrade or downgrade and those who need to relocate. It is a tough environment but perseverance always prevails.
Source: Mortgage Market Guide
We are ready to help you find the best possible mortgage solution for your situation. Contact Sheila Siegel at Synergy Financial Group today.
