What the Fed Pause Means & the Big FIGHT that Broke Out Last Week

By now you probably already heard that Jerome Powell and the Federal Reserve paused interest rate hikes at their meeting last week. The market at large was expecting this to be the meeting that would announce this pause so there was no real surprise. However it is still concerning that they are actively communicating that rates will have to remain higher for longer in order to achieve their numerous mandates. While some would say they are self-imposed, it seems that the headwinds facing them achieving an inflation target of 2% continue to steamroll ahead and that at some point that narrative will have to change as very few believe they will achieve that goal with the current set of monetary policy decisions upon us.

In the world in the real estate a very large Commission based lawsuit concluded last week with a $1.7 billion penalty being handed down to the defendants of the case. The bottom line in this case claims that agents uphold elevated Commission fees to conspire and impose higher costs on sellers by requiring them to offer buyer agent incentives which ultimately become baked into the final price of the home sale. Which makes me ask so what’s the difference between that and when I go buy a car, or a couch, or a watch, or shoes at Nordstrom? Isn’t the cost of paying the salesperson at those jobs baked into the cost I pay at the shelf? It’s literally how they make their commissions.  The answer is yes everybody knows the answer is yes and all this will lead to later is an adjustment in the listing agreement and real estate policy language that generates how buyer agents will be compensated in the future and by who. All this hub-bub about it crashing the real estate market, buyers agent’s futures, and all that is novelty right now. Like all other broad sweeping changes in Real estate and mortgage they take a long time, no matter if the changes are at the federal, state, or local level. More on this one as new information becomes realized in the day-to-day operations of the industry.

I’m a little bit rusty when it comes to this next topic because guess what rates have declined. Yes yes i understand that seeing an interest rate go from 8 to 7.5% or 7.25% or 7% may not seem like it’s really good news because it’s still proportionately higher than what we’ve experienced for the last decade and a half. However, I will let you know that because of the federal reserves decision to pause interest rates, the market has had a very favorable response very quickly and last week we started the month of November off by watching mortgage rates decrease for three consecutive days. The next question is will they continue or will they flatten out and find a local bottom for the remainder of 2023 and to start off 2024. The answer to this question broadly relies on the Fed’s confidence in the data driving their decisions and the resiliency of the economy at large as opposed to only looking at real estate and mortgage through the lens of those industries alone.

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So with that, let’s take a quick look at what’s coming up in the markets this week.

This week if filled to the max again with Fed members speaking at a variety of engagements. I’d be really surprised if they make any comments that deviate from Jerome Powell’s delivered remarks at last Wednesday’s Rate Pause decision.

Monday: Monday FOMC Member Cook Speaks

Tuesday: We get 3 more Fed members speaking, the US trade balance, and month over month Consumer Credit come out

Wednesday: Fed Chair Jerome Powell speaks as well as 3 more Fed members

Thursday: We will see unemployment claims, mortgage delinquencies and Fed Chair Jerome Powell speaks again.

Friday:  Preliminary Consumer sentiment and preliminary inflation expectations come out and another Fed member speaks.

All in all, it’s a bit light on the economic side, but like we always say watch out for that left hook from some seemingly ambiguous data point that wildly shifts the markets in one fail swoop.

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