It’s Fed Day again, and they administered another 25 basis points of “medicine” to the economy. You’ve heard me talk about Barry Habib in the past. He gave the greatest analogy. He has been talking about how if you aren’t feeling well, then the doctor will give you medicine. 5 minutes later, if you’ve still not feeling well, then you get more medicine. And this pattern continues… more medicine, more medicine, etc. as you getting sicker and sicker, and the first medicine hasn’t even caught up.
This same thing is happening in our economy. We’ve been in these Fed hikes for awhile now. It’s having some effect: we are seeing slow downs and inflation has come down significantly and will continue to come down. But the Fed isn’t coming off the throttle with the tightening. I think there is real concern now that they are going to overdo it.
We saw red flags popping up last week and the problems continue – this situation is putting the banks in stress. It’s definitely a wild time.
The Fed probably could come off and probably not do any more increases. But time will tell.
Inflation is Getting Better
PCE and CPI are the two big inflation readings. These are both very heavy on their weighting towards housing costs, and we are seeing rents and housing prices coming down. It takes some time for the results to show up.
The CPI number comes out on May 10 and we should see inflation come down significantly at that point. Once that happens, it is going to bring mortgage rates down and it will boost the real estate market. We are already in a market with tight inventory. When rates come down, it’s going to drive more people into the market.
When Should You Buy a House?
If you are hoping to buy a house in the next 6 – 12 months, I genuinely believe that right now is going to be your best opportunity to negotiate a price. Then you can think about refinancing once these rates come down.
We can’t predict the future, but we’ll see what happens! I think we are going to see some significantly lower interest rates coming soon.
As always, I’m here to answer your questions. Reach out any time!