Great economic news this week has been a boost for homebuyers. The Federal Reserve hinted on Wednesday that it might ease its monetary policy if the economy behaves as expected. However, disappointing economic reports on Thursday and Friday made investors believe interest rates will soon be lowered. This caused mortgage rates to drop to their lowest point this year.
Even though the Federal Reserve kept interest rates unchanged on Wednesday, its official statement showed a slight shift towards a more lenient approach. Instead of solely focusing on controlling inflation, the Fed expressed concerns about a weakening job market. While Fed Chair Powell didn’t commit to a specific date for lowering interest rates, he indicated openness to doing so soon. Investors expect a rate cut in September, with some predicting a larger decrease than usual.
The job market showed signs of slowing down with fewer jobs added than anticipated and an increase in unemployment. Wages also grew at a slower pace than expected. Additionally, the manufacturing sector experienced a significant decline, suggesting a broader economic slowdown.
Lawrence Yun, the chief economist for the National Association of Realtors, had the following to say on Friday, Aug. 2:
Mortgage rates are plunging on the news of weak job growth and rising unemployment. The 4.3% unemployment rate is the highest since coming out of the COVID lockdown and higher than the 3.5% unemployment rate right before the COVID-19 arrival. The hourly wage gain of 3.2% is the weakest in 3 years.
The Fed was late moving away from the restrictive monetary policy stance when early signs of a softening economy were visible. Soft manufacturing survey data, falls in construction activity, and damaging financing costs for small businesses clearly hint at a cooling economy and further cooling in inflation. The Fed may make a deeper cut of 50 basis points in September.
The 30-year fixed mortgage rate looks to fall to 6.5% or even lower in the upcoming weeks. That is what the 10-year bond yield suggests, which plunged to 3.8% this morning, compared to 4.8% a few months ago. The 100-basis-point change in mortgage rates generally means around a $300 lower payment on a typical mortgage. Homebuyers who were priced out a few months ago should re-check whether they can enter the homebuying market if they have secure jobs.
Image by Oleksandr Pidvalnyi from Pixabay
Please feel free to reach out to me to discuss your move into or out of Northern Colorado. Thank you!
James Sack, REALTOR®
Coldwell Banker Residential Brokerage
3665 John F Kennedy Pkwy Suite 210 | Fort Collins, CO 80525
C: (970) 217-9705 | O: (970) 223-6500 | E: James.Sack@cbrealty.com | W: www.JamesSack.com
