I get asked if I think the news and our industry puts too much emphasis on what the Federal Reserve is doing, and its being able to control inflation. In a word, my answer is yes. The Fed has a hand in inflation, but it isn’t the whole story. Broader economic conditions and other market dynamics can influence how quickly and significantly mortgage rates respond to changes in the federal funds rate.

Disruptions to production like natural disasters, higher production costs, and higher oil prices can cause prices to rise.  A ship carrying a load of raw materials from Africa is taken over by pirates or gets stuck due to a port strike in a foreign nation. Tariffs are implemented, raising the prices since average consumers pay entirely for higher tariffs. Crops like corn or oats have a bad year. So on and so on.

For the past two years, inflation has eclipsed everything else at the Fed. U.S. central bankers appear ready to cut interest rates in September amid monthly price numbers continuing to trend down toward the Fed’s 2 percent target and Chair Powell will likely flag a cut more explicitly after a policy meeting at the end of this month. The Fed signaling that interest rate cuts are approaching could help a homebuilding recovery that has been stuck in low gear due to high interest rates.

For those out there hoping for lower mortgage rates, I would ask you what will lower rates do to housing prices, especially houses in the first-time home buyer sector?

That’s right….home prices will rise as more buyers jump into the market with the lower rates.  Get started now by attending one of our free home buyer education classes. Be prepared to make a move before 5 million of your closest friends do, because that is the prediction by the National Association of Realtors.

Curt Tiedeman, NMLS License: 35554, Cell: 206.650.4202 Email:  curt.tiedeman@NewRez.com website:  HomeLoansByCurt.com

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