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I’ve been preparing my clients for mortgage rate cuts in mid-September. This week’s big news was the announcement by the Fed Chairman that they may want to have a larger rate cut — a half point v. a quarter point — given the soft jobs report that came out with only 142,000 jobs added in August, which was below the forecasted 164,00.
Why do we care about the jobs numbers or inflation if we want to buy a house? Because, mortgage rates are indirectly tied to these factors. The rates trend up or down given what investors are doing and the real estate market is a predictor of how well the economy is doing overall.
That’s why in 2022 and 2023, the Feds increased the federal (borrowing) funds rate to slow economic growth and get inflation under control. This was most evident in the skyrocketing costs of housing. Inflation was above the Fed’s target of 2%.
This Fall may be a Spring-like real estate market for buyers as inflation has slowed and the economy is cooling. Mortgage rates change based on investor’s view of how the broader U.S. economy is doing, which is tied to demand for mortgage-backed securities and the Federal government’s policies affecting the market.
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