Last week, at the wrap-up of their meeting, the Fed delivered the gift the markets have been asking for, a decision to pause interest rate hikes and bond-friendly remarks about the economy. As a result, mortgage rates tumbled, improving to levels not seen in many months.
“Given inflation continues to decelerate and the Federal Reserve Board’s current expectations that they will lower the federal funds target rate next year, we likely will see a gradual thawing of the housing market in the new year,” says Sam Khater, Freddie Mac’s Chief Economist.
The main takeaways from the Fed Meeting included the fact that inflation continues to head lower, the economy is slowing, but no recession expected in the short term, the job market is expected to remain healthy, and the Fed is considering beginning rate cuts in the new year. Analysts are predicting March or April, but it’s only a guess.
All of these points are bond-friendly, which, in turn, creates a more favorable environment for mortgage rates to improve. Of course, we can’t predict the future, but it looks like the New Year could see some thawing in the housing market.
So, if you’re considering a purchase in 2024, let’s talk soon so we can strategize your timing and plan to help you reach your financial goals. Of course, I can’t predict exactly what rates will do in the coming months or weeks, and it’s not likely to be all improvement. But what we do know is that the improvement we saw last week was incredible and not something we could’ve imagined just weeks ago.
As for what else I’m watching this week…
Usually, the last two weeks of the year are mostly quiet in the markets, and so far, that’s the story that’s playing out with the 10-year Treasury bond – which often portends mortgage rates – sticking to a narrow, steady range.
We have some important housing data coming out and will end the week on Friday with the Fed’s favorite inflation indicator, which will no doubt grab the attention of the markets.
Already this week, we saw the numbers for Housing Starts and Building Permits beat expectations. Housing starts in November were expected to fall back to a 1.36 million annual rate versus October’s 1.37 million rate but instead came in at an impressive 1.56 million. Permits, on the other hand, were at a better-than-expected 1.487 million in October but slowed more than expected to a 1.46 million rate.
Next up is Existing Home Sales, and after October’s lower-than-expected 3.79 million annual rate, existing home sales in November are expected to edge yet lower to a 3.775 million rate. Low inventory of homes for sale, high prices, and high-interest rates have been hurting sales, so it will be interesting to see how the numbers come in.
Friday’s New Home Sales report is predicted to show from a lower-than-expected 679,000 in October that forecasters see annual sales rising to 690,000 in November.
Last but not least, the Fed’s favorite inflation indicator comes out on Friday, and inflation readings for November are expected at monthly a fall of 0.1 percent overall but a 0.2 percent increase for the core. Annual rates are expected at 2.9 percent overall and 3.4 percent for the core (versus October’s 3.0 and 3.5 percent). Keep in mind that the Fed seeks to keep inflation in its comfort zone between 1-2 percent, so there will be loads of interest in how this inflation looks.
Have a great rest of your holiday season, and I’ll return in the New Year!
I want you to know that I’m grateful for the honor of serving you and all of your home financing needs in 2023, and I look forward to continuing to serve you in 2024. Happy Holidays and Cheers to a New Year!
