The housing market cheered as the Federal Reserve signaled interest rate cuts next year after making a series of rapid rate hikes starting in 2022. While the central bank did not completely rule out the possibility of a rate increase in 2024, that action seems unlikely. Instead, fresh economic projections from central bank officials showed rates would be slashed to a median 4.6% by the end of 2024, suggesting three 25 basis point cuts from current levels. Experts expect the path for monetary policy to support further declines in mortgage rates, just in time for a traditional busy spring housing market. But home buyers who waited on the sidelines for better rates next year may find the waiting game didn’t pay the dividends they expected. The median price of single-family homes in the United states is 425,000 which is 2.4% up from last year at the same time according to Altos research. And if rates continue to ease while demand picks up…home prices will follow suit and climb as well.
So this fed meeting everyone is talking about really was quite positive. With the inflation rate easing and the economy holding in, policymakers on the Federal Open Market committee voted unanimously to keep the benchmark overnight borrowing rate in a targeted range between 5.25% to 5.5%. Committee members penciled in at least three rate cuts in 2024, which is less than what the market had been pricing in, but more aggressive than what officials had previously indicated. The feds dot plot chart indicates another four cuts in 2025 and three more rate reductions in 2026 which could take the feds funds rate down to between 2% to 2.25%. The committee added the qualifier that inflation has eased over the past year while maintaining its description of prices as elevated. Fed officials see core inflation falling over the next two years eventually getting back to their 2% target but not until 2026, that’s right 2026.
And mortgage rates fell below 7% for the first time in four months, bringing some relief to the US housing market that has been plagued with affordability all year. Borrowing costs have eased for seven straight weeks now bringing rates all the way down from their highs of 8% in October down to 6.9% on average. In some cases, VA with high credit scores are still well below THAT! Just last week we were able to lock in a VA loan at 5.875% When’s the last time you saw that number? That’s right it’s been a while but this could also just be a sign of things to come so if you are watching this and you have a FHA or VA loan that is 6.5% percent or higher, drop us a DM or comment below and maybe we can help you save some money with one of your loan program’s streamline refinance options.
So with that, let’s take a quick look at what’s coming up in the markets this week. It will be a pretty light week leading up to Christmas break for the markets, and given the fact that literally everyone was waiting on last week’s Fed meeting to be the Finale we were all hoping for, this week can really take a chill pill and ease us on home to a simple end of year.
Monday we get the National Association of home builders housing market index
on Tuesday we’ll get building permits and housing starts
on Wednesday we will get the consumer confidence reading as well as existing home sales
Thursday will deliver final GDP quarter over quarter, unemployment claims, and the Philly fed manufacturing index
Friday we’ll finish it off with core PCE, revised consumer sentiment, and new home sales
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