What To Look For From This Week’s Fed Meeting
What To Look For From This Week’s Fed Meeting You may have noticed discussions about the Federal Reserve (the Fed) and its influence on the housing market lately. Here’s what’s going on: This week, the Fed meets again to decide the direction of the Federal Funds Rate, which determines the borrowing costs between banks. Although this rate isn’t the same as mortgage rates, it can still indirectly affect them. If you’re considering buying or selling a home, you may be wondering how these changes will impact mortgage rates and when they might start to drop. Here’s a quick look at what drives the Fed’s decisions and what to watch for next. Their actions are primarily guided by three main economic indicators: The Direction of Inflation How Many Jobs the Economy Is Adding The Unemployment Rate Let’s take a look at each one. 1. The Direction of Inflation You’ve probably noticed that prices for daily essentials keep increasing. This is due to inflation, and the Fed is working to bring it down to their target rate of 2%. Currently, inflation remains above this goal. However, despite some ups and downs, the overall trend has been positive, with inflation gradually decreasing over the past two years and staying relatively steady at present (see graph below): The trajectory of inflation, though still above target, is a key reason why the Fed is expected to lower the Federal Funds Rate again this week. This adjustment aims to make borrowing more affordable while supporting steady economic growth. 2. How Many Jobs the Economy Is Adding The Fed is also closely monitoring monthly job growth. They’re looking for a slight slowdown in job creation before making additional cuts to the Federal Funds Rate. This slowing pace signals that the economy remains stable while gradually cooling, aligning with their goals. And, according to Reuters, that’s precisely the trend we’re seeing right now. “Any doubts the Federal Reserve will go ahead with an interest-rate cut . . . fell away on Friday after a government report showed U.S. employers added fewer workers in October than in any month since December 2020.” Employers are still bringing on new hires, but at a more moderate pace. This shift indicates the job market is cooling after a period of rapid growth, aligning with the Fed’s goals. 3. The Unemployment Rate The unemployment rate reflects the percentage of people actively seeking jobs who are unable to find them. While a low rate indicates that most people are employed, it can also drive inflation up, as more people working generally leads to increased spending, which can push prices higher. Economists often view an unemployment rate under 5% as close to full employment. According to the latest data, the current unemployment rate is 4.1% (see graph below): Such a low unemployment rate indicates that the labor market remains strong, even with a slower pace of job additions. This balance is exactly what the Fed aims to achieve. What Does This Mean Going Forward? The economy is moving in the direction the Fed hopes for, which is why analysts expect a likely cut of a quarter-point to the Federal Funds Rate this week, according to the CME FedWatch Tool. If this happens, it could create conditions for mortgage rates to decrease as well, though any reduction in rates won’t be immediate. Since the Fed doesn’t directly set mortgage rates, forecasts suggest mortgage rates will trend downward more gradually through the next year, provided economic indicators remain favorable and further Federal Funds rate cuts are feasible through 2025. However, any shifts in these key economic factors could alter the Fed's strategy and affect the market's direction in the coming months, creating potential rate volatility. As Ralph McLaughlin, Senior Economist at Realtor.com, explains: "The trajectory of rates over the coming months will be largely dependent on three key factors: (1) the performance of the labor market, (2) the outcome of the presidential election, and (3) any possible reemergence of inflationary pressure. While volatility has been the theme of mortgage rates over the past several months, we expect stability to reemerge towards the end of November and into early December." Bottom Line While the Fed's decisions influence the market, it's ultimately economic data and market conditions that determine mortgage rates. Looking ahead to the rest of 2024 and into 2025, we can expect mortgage rates to either stabilize or decrease gradually, bringing more certainty to a market that has been quite volatile.
Expect the Unexpected: Anticipating Volatility in Today’s Housing Market
Expect the Unexpected: Anticipating Volatility in Today’s Housing Market If you’re considering a move, you’ve likely noticed that the housing market feels a bit uncertain. Home prices and mortgage rates are more volatile than usual, and understanding why is key. Here’s a high-level look at what’s driving these changes and how to navigate them effectively. What’s Driving Today’s Market Volatility? Economic data, unemployment rates, Federal Reserve policies, and the upcoming presidential election are all contributing to today’s uncertainty—and this often leads to market fluctuations. Mortgage rates are a prime example. Economic reports, geopolitical events, and other key updates can cause quick rate changes, even though the general forecast suggests a gradual decrease. This is especially evident with monthly releases of employment and inflation data, which can trigger immediate reactions in the market. As Greg McBride, CFA, Chief Financial Analyst at Bankrate, explains, these types of updates will likely keep influencing mortgage rates as the markets respond to new information: “After steadily declining throughout the summer months, I expect more ups and downs to mortgage rates . . . Job market data will be closely watched as well as any clues from the Fed about the extent of upcoming interest rate cuts.” This explains why we can’t expect mortgage rates to steadily decline in a straight line over the coming year. As Hannah Jones, Senior Economic Research Analyst at Realtor.com, points out, various economic factors will continue to create fluctuations along the way: “Rates have shown considerable volatility lately, and may continue to do so . . . Overall, we still expect a downward long-term mortgage rate trend.” Working with a professional who understands the market dynamics in your area is the best way to navigate today’s housing conditions. They’ll provide insights into local trends, such as price movements and inventory levels, which can vary significantly from one region to another. With expert guidance, you’ll be able to make informed decisions and stay on top of any market shifts that could impact your buying or selling goals. The Importance of Partnering with a Pro With an experienced agent by your side, you’ll have a guide through every step of the process, from understanding how mortgage rate changes affect your budget to navigating competitive or fluctuating local markets. They’ll not only provide clarity around each shift but also help you stay focused on the bigger picture—whether that’s finding the right home within your budget or timing your sale for maximum value. This way, no matter what’s happening in the market, you’re well-prepared and equipped to make informed, confident decisions tailored to your unique needs and goals. Bottom Line While the housing market is indeed evolving, there's no need to let that hold you back. With guidance from a knowledgeable real estate agent and insights from a trusted lender, you’ll be equipped to handle any shifts and leverage the opportunities they bring. Let's turn today’s uncertainties into your advantage, so you can move forward confidently toward your homeownership goals.
Is a Fixer Upper Right for You?
Is a Fixer Upper Right for You? Thinking about buying a home but feeling like affordability is a major hurdle? Here’s the good news: becoming a homeowner is still possible, even when the budget feels tight—and a fixer-upper might just be the way to do it. Let’s explore why buying a fixer-upper could be your path to homeownership and how you can make it work. What Is a Fixer Upper? A fixer-upper is a home that’s livable but needs some improvements. The scope of work can vary—some might just need cosmetic changes like removing wallpaper or updating flooring, while others could require bigger repairs, such as a new roof or plumbing upgrades. Since these homes need a bit of effort, they generally come at a lower price point relative to local market values. According to a survey by StorageCafe, fixer-uppers typically cost around 29% less than move-in-ready homes. This price difference is why, as recent surveys show, more buyers are open to considering homes that need a bit of work. If you're looking for an option to get your foot in the door, and you're willing to roll up your sleeves and do a bit of work, a house with untapped potential may be a good option. Tips for Buying a Home That Needs Some Work Before you buy a home that might need a makeover, here are a few key considerations: Choose a Good Location: While you can renovate a house, you can’t change its location. Ensure the home is in a neighborhood you enjoy or one with rising property values and expanding amenities. This way, even after investing in improvements, your home’s value will likely increase over time. Budget for Surprises: Renovating a home can often require more time and money than expected. Be sure to leave some flexibility in your budget for unexpected repairs or surprises that might arise during the renovation process. Get a Home Inspection: Before purchasing, hire a home inspector to thoroughly assess the property. They’ll help identify necessary repairs upfront, so you can avoid costly surprises down the road. Plan Your Priorities: When planning your renovations, it’s helpful to categorize your goals into three groups: must-haves (essential repairs), nice-to-haves (upgrades that enhance convenience), and dream-state features (luxuries you might add down the line). This approach will help you prioritize effectively and stay within budget. Remember, the perfect home is the one you perfect after buying it. Choosing a fixer-upper allows you to customize a home to your taste while saving on the initial price. With thoughtful planning, a set budget, and a bit of creativity, you can transform a house in need of TLC into your ideal home. Real estate agents excel at spotting properties with potential. They understand the local market and can guide you toward homes where smart upgrades can boost value. With their support, you’re more likely to find a property that fits your budget and offers room for valuable improvements. Bottom Line In today’s market, where the cost of homeownership can be daunting, finding a budget-friendly, move-in-ready home can seem challenging. However, if you’re willing to invest some effort, a fixer-upper offers the chance to gradually transform a space into your dream home. Let’s look at the possibilities and find a place that could be the perfect fit for you.
Q&A: How Do Presidential Elections Impact the Housing Market?
Q&A: How Do Presidential Elections Impact the Housing Market? Even if you’re not planning to move right away, you may have questions about how the election could affect the housing market. By examining historical trends alongside current data, we can find answers. Historically, mortgage rates tend to decrease in the months leading up to the election, while home prices and sales often rise in the year after. The evidence shows that Presidential elections typically have only a small and temporary impact on the housing market.
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