Is This The Calm Before The Mortgage-Rate Storm?

Is This the Calm Before the Mortgage-Rate Storm?
Hey there JAG Realtonians I have an update for you!

So we're in a big pickle, which means the FED might have to pivot way sooner than originally planned! And that means chaos down the road!

Just over a week ago, Fed Chair Powell stated that interest rates are likely to be higher than anticipated, raising the terminal rate to 5.5% to 5.75%. But, he didn't specify how high the interest rates will go! The system broke down shortly after the speech, causing turmoil within the banking system, leading to jumps in interest rates and complete chaos! But, what's the FED's actual plan? 


Well the good news is US inflation cooled in February - yay! Even as the FED had to confront bank failures, Consumer Price Index numbers have fallen for nine consecutive months, with CPI headline inflation now sitting at 6%, which is its lowest level since September of 2021.

That's still way too high though, as we are still significantly above the FED's target of two percent inflation.

We have a couple of big months coming up; April, May, and June are huge months and once those months come off, we're likely to see inflation improve significantly!

Part of the reason for the cool-off in inflation is a drop in energy costs, which has helped to keep inflation in check. Unfortunately, shelter costs have increased by nearly 8.1% in the past year, accounting for nearly 60% of the inflation number after stripping out both energy and food prices. But, there's good news on the shelter front! Rent increases have dropped to the lowest level in nearly a year!


Now, for the not-so-good news! Interest rates are improving, which is good for homebuyers, but it comes with a lot of turmoil within the banking system. We saw a flight to safety in the wake of bank failures, pushing mortgage rates down. But, as we saw interest rates lower, we actually saw mortgage demand jump once again as buyer demand started picking up!

So, what's the FED going to do? Keep raising interest rates? Pause interest rates? Pivot and reduce interest rates? Who knows but, I'm keeping an eye on it for you!

Real Estate in the News

Current mortgage interest rates

rates as of 3/25/23

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