Good Friday Morning, from your Hometown Lender,
Some big news today for the markets to digest.
PCE which is the Fed’s favorite inflation gauge is the star and thankfully came in as expected at .2%. This keeps markets calm and keeps expectations the Fed will cut in September and will deliver 100bps in cuts before the end of the year intact. I am not convinced on that second piece yet, but I will cheer it on. The thing to realize is these expected rate cuts have already been priced into the market. Rates are down because of these anticipated cuts and so if the Fed stays the course that the markets have predetermined (which has been a fool’s errand for the last two years and the Fed has not followed the markets but has instead led them). I’m mentioning this because, if the Fed cuts as expected, there may not (likely will not) be any movement to rates.
What will move rates is what is said after the AFTER the cut.
Chairman Powell could say the economy is weakening and the Fed will continue to cut but why say that instead of cutting more now. He could say, this cut will be it for now and we will see how the economy responds. If he would say something like that, well, rates will worsen immediately. Additionally, while the Fed says they are apolitical, that they may massage ore even delay their decisions to avoid being political, makes them political. I am thankful rates have improved but not so sure we will see more improvement in the short term. The good choice would be to buy now as home prices will continue to go up. Next week’s biggest data point is Friday with the jobs report. That will move markets for sure.
Speaking of loans…
For the five years ending 1/20, the median down payment was 10% of the home purchase price. Since then, it’s almost steadily risen and is now 18.6%. Consequently, the down payment dollar amount has jumped from $30,000 pre-Covid to almost $70,000. Reasons for the rise include the rise in stock prices, the decline in first-time buyers, and the rise in home equity for buyers who are selling another home. Why do I mention this? Well, I continue to hear concerns over the buyer’s ability to pay their commissions. From this data, it appears that the majority of buyers will be able to pay their agent’s commissions.
