August 20, 2024
The upcoming Federal Open Market Committee (FOMC, or just ‘Fed’) meeting September 17-18 is one of the most widely (wildly?) anticipated business meetings this year, and the housing industry is on the edge of its proverbial seat. The questions are: 1. Will Jerome Powell’s talk at the Jackson Hole Symposium (organized by the Kansas City Fed) on August 23 offer clear guidance or clues as to what the Fed may do with interest rates in September and 2. What, or how, might the Fed adjust the core lending rate from its current 5.25%-5.5% level?
Based on lower inflation rate measures (2.89% versus 3.18% a year ago) and the CPI, or core price index (313.53 or up from 304.63 a year ago), Wall Street traders have factored in a rate cut of 50 basis points.
For the housing industry, what matters most is the benchmark, 30-year fixed mortgage rate, which we have seen dip below 6.5% this summer. Many of us in real estate services and sales believe when rates dip below 6%, it will generate an emotional boost to buyers and even sellers and the business of buying and selling residential real estate should see in increase in trading activity. Beyond the emotional bump, there is significant pent-up demand for home buyers and this combination is likely to generate more listings and subsequently, more closings.
To be clear, if rates do dip below 6% sometime soon, we don’t expect the floodgates to open on Sonoma County home buying and selling, though we do think it will be a step in the right direction and eventually get us back to more normal trading activity. Stay tuned.
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