Markets • October 6, 2024

Home Values Rise Even as Median Prices Fall Oct 2024

by Shawn Keane

Home Values Rise Even as Median Prices Fall

Recent headlines have been buzzing about the median asking price of homes dropping compared to last year, and that’s sparked plenty of confusion. And as a buyer or seller, it’s easy to assume that means prices are coming down. But here’s the catch: those numbers don’t tell the full story.

Nationally, home values are actually rising, even if the median price is down a bit. Let’s break down what’s really happening so you can make sense of the market without getting caught up in the fear the headlines create.

Homes on the Market Right Now Are Smaller

The biggest reason for the dip in median price is the size of homes being sold. The median price reflects the middle point of all the homes for sale at any given time. And that’ll be affected by the mix of homes on the market.

To show you how this works, here’s a simple explanation of a median (see visual below). Let’s say you have three coins in your pocket, and you decide to line them up according to their value from low to high. If you have one nickel and two dimes, the median (the middle one) is 10 cents. If you have two nickels and one dime, the median is now five cents.

In both cases, a nickel is still worth five cents and a dime is still worth 10 cents. The value of each coin didn’t change. The same is true for housing.

Right now, there’s a greater number of smaller, less expensive homes on the market, and that’s bringing the overall median price down. But that doesn’t mean home values are declining.

As Danielle Hale, Chief Economist at Realtor.com, explains:

“The share of inventory of smaller and more affordable homes has grown, which helps hold down the median price even as per-square-foot prices grow further.”

And here’s the data to prove it.

Price Per Square Foot Is Still Rising

One of the best ways to measure home values is by looking at the price per square foot. That’s because it shows how much you’re paying for the space inside the home.

The median asking price doesn’t take into account the size of different homes, so it may not always reflect the true value. And the latest national price per square foot data shows home values are still increasing, even though the median asking price has dropped (see graph below).

As Ralph McLaughlin, Senior Economist at Realtor.com, explains:

“When a change in the mix of inventory toward smaller homes is accounted for, the typical home listed this year has increased in asking price compared with last year.”

This means that while smaller homes are affecting the median price, the average home’s value is still rising. According to the Federal Housing Finance Agency (FHFA):

“Nationally, the U.S. housing market has experienced positive annual appreciation each quarter since the start of 2012.”

So, while headlines may make it sound like prices are crashing, you don’t have to worry. With a closer look and more reliable data, you can see that prices are still climbing nationally.

But it’s important to remember that home prices can vary by region. While national trends provide a big-picture view, local markets may be experiencing different conditions. A trusted agent is the best resource to explain what’s happening in your area.

Bottom Line

The decrease in median price is not the same as a decrease in home values. The median asking price is down mostly due to the mix of smaller, less expensive homes on the market.

The important thing to focus on is the price per square foot, which is a better indicator of overall market value—and those prices are still going up. If you have questions about what home prices are doing in our area, feel free to reach out.

Uncategorized • October 6, 2024

Don’t Fall for These Real Estate Agent Myths

by Shawn Keane

Don’t Fall for These Real Estate Agent Myths

When it’s time to buy or sell a home, one of the most important decisions you’ll make is who you’ll work with as your agent. That choice will have an impact on your entire experience and how smoothly it goes.

As you figure out who you’ll partner with, it’s important to know what to expect and what to look for. Unfortunately, there may be some myths holding you back from making the best decision possible. So, let’s take some time to address those, and make sure you have the information you need to find the right agent for you.

Myth #1: All Real Estate Agents Are the Same

You might think all agents are the same – so it doesn’t matter who you work with. But, in reality, agents have varying levels of experience, specialties, and market knowledge, which can have a big impact on your results. For example: you’ll get much better service and advice from someone who is a true expert in their field. As Business Insider explains:

“If you were planning to get your hair done for a special event, you’d want to visit a stylist who specifically has experience doing that type of work — you wouldn’t make an appointment with someone who primarily does kids’ hair. The same concept applies to finding a real estate agent. If you have a smaller budget, you probably don’t want to work with an agent who exclusively sells multimillion-dollar properties.”

Take some time to talk with each agent you’re considering. Ask about their experience level and what they specialize in. This will help you find the one that’s the best fit for your search.

Myth #2: You Can Save Money by Not Using an Agent

As a seller, you may think you can save money by not working with a pro. However, the expertise, negotiation skills, and market knowledge an agent provides generally saves you money and helps you avoid making costly mistakes. Without that guidance, you could find yourself doing something like overpricing your house. And that’s a misstep that’ll cost you when it sits on the market for far too long. That’s why U.S. News Real Estate says:

“When it comes to buying or selling your home, hiring a professional to guide you through the process can save you money and headaches. It pays to have someone on your side who’s well-versed in the nuances of the market and can help ensure you get the best possible deal.”

Myth #3: Agents Will Push You To Spend More

You may also be worried an agent will push you to buy a more expensive house in order to increase their commission. But that’s not how that should go. A good agent will respect your budget and work hard to find a home that truly fits your financial situation and needs. With their market know-how, they’ll point you toward the best option for you, rather than try to pad their own pockets on your dime. As NerdWallet explains:

“Among other things, a good buyer’s agent will find homes for sale. A buyer’s agent will help you understand the type of home you can afford in the current market, find listed homes that match your needs and price range, and then help you narrow the options to the properties worth considering.”

Myth #4: Market Conditions Are the Same Everywhere, So Why Do I Need a Pro?

Maybe you believe housing market conditions are the same no matter where you are. But that couldn’t be further from the truth. Real estate markets are highly localized, and conditions can vary widely from one area to another. This is why you can’t pick just anyone you find online. You should choose an agent who’s an expert on your specific local market. As a recent article from Bankrate says:

“Real estate is very localized, and you want someone who’s extremely knowledgeable about the market in your specific area.”

You’ll know you’ve found the right person when they can explain the national trends and how your area stacks up too. That way you’re guaranteed to get the full picture when you ask: “how’s the market?”

Bottom Line

Don’t let myths keep you from the expert guidance you deserve. With market knowledge and top resources, a trusted local real estate agent isn’t just helpful, they’re invaluable.

In what could be one of the biggest financial decisions of your life, having the right pro by your side is a game changer. Let’s connect and make sure you get the best outcome possible.

My Monthly Market Summary • October 6, 2024

Greater Phoenix Housing Market Update from Shawn with Coldwell Banker Realty

by Shawn Keane

Good evening,

As I stated in my mid-September update, I was seeing buyer traffic pick up, and wow, the September numbers certainly reflect that! What an improvement in under-contract/pending sales, best seen in the last five months! Read below for more info…..

Market Summary for the Beginning of October

Here are the basics – the ARMLS numbers for October 1, 2024 compared with October 1, 2023 for all areas & types:

Active Listings: 19,643 versus 13,404 last year – up 47% – and up 6.6% from 18,430 last month
Under Contract Listings: 7,261 versus 6,499 last year – up 11.7% – and up 9.1% from 6,658 last month
Monthly Sales: 5,447 versus 5,573 last year – down 2.3% – and down 4.9% from 5,730 last month
Monthly Average Sales Price per Sq. Ft.: $284.46 versus $285.28 last year – down 0.3% – and down 2.1% from $290.53 last month
Monthly Median Sales Price: $442,000 versus $432,000 last year – up 2.3% – and up 0.5%from $440,000 last month

At last we can see some signs of life in the re-sale housing market after an extended period in limbo. Reaction to the lower mortgage rates that have emerged since July has been slow in coming but is now detectable. Under contract listings went up over 9% during the course of September and are almost 12% higher than this time last year.

Sales volumes during September remained painfully low, but the housing market does not turn on a dime. We should start to see better closing numbers during October as long as the under contract counts keep improving.

Pricing fell back again after a short term increase during August. In fact the average $/SF is very slightly lower than it was a year ago. However the median sales price is up 2.3% from last year, so there is no need for despair. Pricing is very stable.

Re-sale supply is increasing, as it usually does between August and November, so the extra demand is being exceeded by extra supply. This means we can expect the CMI to drift lower for another month and buyers will continue to have favorable negotiating power. If supply starts to fall sometime in November, which we would normally expect. then we can reasonably expect the CMI trend to reverse and move higher again by the end of 2024, which would indicate balance.

The contract ratio has edged up very slightly from 36.1 to 37 over the course of September. Both figures represent a balanced market, but edging up is better than drifting down. If we are going to see significantly more favorable conditions for sellers, then look for this number to reach 45. This is where we stood last June. This will likely happen into next year the spring season, which starts in March. Now, until January, it is a good time for buyers to get a better deal before the competition begins. Demand will outdo supply by spring into summer, especially if interest rates are at 6%.

Mortgage Rates • September 19, 2024

Mortgage Rates Drop to Lowest Level in over a Year and a Half

by Shawn Keane

Mortgage Rates Drop to Lowest Level in over a Year and a Half

Mortgage rates have hit their lowest point in over a year and a half. And that’s big news if you’ve been sitting on the homebuying sidelines waiting for this moment.

Even a small decline in rates could help you get a better monthly payment than you would expect on your next home. And the drop that’s happened recently isn’t small. As Sam Khater, Chief Economist at Freddie Mac, says:

“Mortgage rates have fallen more than half a percent . . . and are at their lowest level since February 2023.”

But if you want to see it to really believe it, here’s how the math shakes out. Take a closer look at the impact on your monthly payment.

The chart below shows what a monthly payment (principal and interest) would look like on a $400K home loan if you purchased a house back in April (this year’s mortgage rate high), versus what it could look like if you buy a home now (see below):

Going from 7.5% just a few months ago to the low 6s has a big impact on your bottom line. In just a few months’ time, the anticipated monthly payment on a $400K loan has come down by over $370. That’s hundreds of dollars less per month.

Bottom Line

With the recent drop in mortgage rates, the purchasing power you have right now is better than it’s been in almost two years. Let’s talk about your options and how you can make the most of this moment you’ve been waiting for.

Mortgage Rates • September 19, 2024

Falling Mortgage Rates Are Bringing Buyers Back Sept 2024

by Shawn Keane

Falling Mortgage Rates Are Bringing Buyers Back

If you’ve been hesitant to list your house because you’re worried no one’s buying, here’s your sign it may be time to talk with an agent.

After months of high rates keeping buyers on the sidelines, things are starting to shift. Rates are already coming down due to a number of economic factors. And yesterday the Federal Reserve cut the Federal Funds Rate for the first time since they began raising that rate in March 2022. And while they don’t control mortgage rates, this sets the stage for mortgage rates to fall even further than they already have – especially since more cuts from the Fed are expected into next year. And lower mortgage rates are bringing more buyers back into the market. Lisa Sturtevant, Chief Economist at Bright MLS, says:

“A drop in the cost of borrowing will help fuel more homebuyer demand . . . Falling rates will also bring more sellers into the market.”

The best part? You can take advantage of that renewed buyer interest.

As Rates Fall, Buyer Activity Goes Up

The graph below illustrates the relationship between falling mortgage rates and rising buyer activity. The orange line represents the average 30-year fixed mortgage rate, while the blue line shows the Mortgage Bankers Association (MBA) Mortgage Application Index, which tracks the number of mortgage applications.

As you can see, as mortgage rates (orange) come down, the Mortgage Application Index (blue) rises, showing more people start to re-engage in the process (see graph below):

What This Means for You

According to the National Association of Realtors (NAR), home sales increased in July, which was a welcome shift after four straight months of declines. If you’re a homeowner thinking about selling, this uptick in buyer activity works in your favor.

More buyers means more competition, which can lead to higher offers and shorter time on the market for your house. And, according to Edward Seiler, AVP of Housing Economics at the Mortgage Bankers Association (MBA), this trend is expected to continue:

“MBA is expecting that slower home-price appreciation, coupled with lower rates, will ease affordability constraints and lead to increased activity in the housing market.”

All in all, the market is becoming more accessible to a wider range of buyers, which could result in even more people looking to purchase a house like yours.

With more buyers entering the market, now’s the time to start getting your house ready to sell.

Bottom Line

The recent decline in mortgage rates is already driving more buyers into the market, and experts project this trend will continue. Let’s work together to take advantage of this increased buyer demand and get your house ready to sell.

My Monthly Market Summary • September 6, 2024

Market Summary for the Beginning of September 2024

by Shawn Keane

Market Summary for the Beginning of September

Here are the basics – the ARMLS numbers for September 1, 2024 compared with September 1, 2023 for all areas & types:

Active Listings : 18,430 versus 11,969 last year – up 54% – and up 5.5% from 17,474 last month
Under Contract Listings : 6,658 versus 7,111 last year – down 6.4% – and down 8.6% from 7,287 last month
Monthly Sales: 5,683 versus 6,267 last year – down 9.3% – and down 8.5% from 6,208 last month
Monthly Average Sales Price per Sq. Ft.: $290.60 versus $282.14 last year – up 3.0% – and up 1.3% from $286.74 last month
Monthly Median Sales Price: $440,000 versus $435,000 last year – up 1.1% – but unchanged from $440,000 last month

The re-sale market continues in the doldrums and has reacted very little so far to the lower mortgage rates that have emerged since July. Under contract listings went down a further 8.6% during August rather than staging a recovery. Demand appears to be stronger in the new home sector but that has a relatively modest effect on the MLS statistics because the bulk of new homes are not listed on the MLS. However, one look at the stock price charts for the major homebuilders will tell you they are in a good mood.

Re-sale supply usually rises between August and November, but this year the trend got off to an early start and we have 5.5% more listings active and without a contract than a month ago. With demand weak and supply rising, sellers are not getting the break they were probably hoping for. Concession to buyers and price cuts continue to be common and widespread.

The contract ratio is somewhat less stable, and this represents a further cooling in the market. It seems many potential buyers want to see rates drop below 6% before they make a move.

The only bright spot for sellers is that pricing improved during August with the average $/SF rising 1.3% from July. However, the median sales price was unchanged and is up only 1.1% from a year ago. This is less than inflation so in real terms homes are cheaper than this time last year. This statement does not apply to the very top end of the market which has significantly risen in price over the last 12 months. In fact, we saw a new record of almost $32.4 million paid for a new home just completed in Paradise Valley’s Mummy Mountain Estates. Unusually, this was a spec home and it sold for more than $2,000 per sq. ft. The market over $5 million is not seeing the same conditions as the regular market.

It would take a resurgence in demand to pump more life back into this dormant regular market and so far it seems that the Federal Reserve has not done enough by suggesting they are in favor of dropping the base rate. The question now is whether actually dropping the rate in September is going to be an event or a snooze for home buyers.

As usual, we will have to wait and see. Look to the under contract count to be the first thing to show any pick-up in demand. Source Cromford Report

Did you know that the housing affordability index has declined over the past four years; the Housing Affordability Index, which measures whether a typical family earns enough income to qualify for a mortgage on a median-priced home, has dropped to its lowest levels since 1996. This indicates that housing has become less affordable for the average American household.

The average American needs to spend an additional $11,434 annually to maintain the same standard of living they had in January 2021. This increase is primarily due to higher costs in essential categories like food, transportation, housing, and energy. Unfortunately, wages haven’t kept up with inflation. All this impacts affordability for homes that have increased so much. The good news is that if the unemployment rate stays under 4.4% (Arizona is at $3.4%) and mortgage interest rates drop below 6%, it will maintain a robust housing market and economy. We must get through this slow time of the year and the election; things will pick up again.

There is pent-up demand for housing if mortgage interest rates are below 6%.

VA loan programs allow 0 down out of pocket. Conventional loans require as little as 3% down, and FHA loans require 3.5% down. With a reasonable offer, the seller may pay most or all of the buyer’s closing costs. There are also down payment assistance programs.

Please visit my website for up-to-date information, daily blog, monthly reports, and seller and buyer guides, and sign up for Neighborhood News, “the best way to stay connected to what’s happening in the real estate market in your area.” See homes that are for sale and recently sold, find out if home sales in your neighborhood are trending up or down, and see what homes around you are currently selling for. Also, you can search real-time listings in any market area under SEARCH FOR HOMES. Call or text me anytime.

The best compliment is a referral to your family and friends! Thank you so much!

All the best,

SHAWN KEANE

REALTOR, ARIZONA
(602) 989-3209 Cell

shawn.keane@azmoves.com

Visit My Website | Home Valuation | Read My Reviews

Markets • August 30, 2024

Hello from Shawn; where will things be in a year

by Shawn Keane

Hello from Shawn; where will things be in a year

I would love to hear your thoughts…..

You can click below to see what others say about how the 2025 housing market may look like.

My thoughts and some statistical facts: As long as the economy can maintain jobs and interest rates continue their downward projection, the housing market should continue to support these levels and likely move up in 2025.

However, a lot can change in the coming months; the consumer is looking financially stressed, and there are signs everywhere that they are pulling back on spending. Overall, delinquency rates for credit cards and auto loans have increased; in 2024, auto loan balances were 90 or more days delinquent, the highest rate since early 2021. The delinquency rate on credit card loans has almost doubled compared to early 2021, and credit card loan balances have increased by nearly 30% since early 2021, an all-time high (many Americans are using their credit cards for essential living expenses). Then you have the housing affordability index, which has declined over the past four years; the Housing Affordability Index, which measures whether a typical family earns enough income to qualify for a mortgage on a median-priced home, has dropped to its lowest levels since 1996. This indicates that housing has become less affordable for the average American household.

I mention all this because it could profoundly affect the direction of the housing market in the next year or so. Did you know that 28% of all home sales in Arizona this year were from cash buyers, leaving 72% that need a loan?

Please be on the lookout for my Phoenix area market report in the coming days. It will be detailed and specific to the Phoenix and surrounding housing market.

2025 Housing Market Forecasts: What To Expect Nationally

Looking ahead to 2025, it’s important to know what experts are projecting for the housing market.

Continue Reading

SHAWN KEANE

REALTOR, ARIZONA

(602) 989-3209 Cell

shawn.keane@azmoves.com

Visit My Website | Home Valuation | Read My Reviews

Markets • August 30, 2024

2025 Housing Market Forecasts: What To Expect

by Shawn Keane

2025 Housing Market Forecasts: What To Expect

Looking ahead to 2025, it’s important to know what experts are projecting for the housing market. And whether you’re thinking of buying or selling a home next year, having a clear picture of what they’re calling for can help you make the best possible decision for your homeownership plans.

Here’s an early look at the most recent projections on mortgage rates, home sales, and prices for 2025.

Mortgage Rates Are Projected To Come Down Slightly

Mortgage rates play a significant role in the housing market. The forecasts for 2025 from Fannie Mae, the Mortgage Bankers Association (MBA), the National Association of Realtors (NAR), and Wells Fargo show an expected gradual decline in mortgage rates over the course of the next year (see chart below):

Mortgage rates are projected to come down because continued easing of inflation and a slight rise in unemployment rates are key signs of a strong but slowing economy. And many experts believe these signs will encourage the Federal Reserve to lower the Federal Funds Rate, which tends to lead to lower mortgage rates. As Morgan Stanley says:

“With the U.S. Federal Reserve widely expected to begin cutting its benchmark interest rate in 2024, mortgage rates could drop as well—at least slightly.”

Expect More Homes To Sell

The market will see an increase in both the supply of available homes on the market, as well as a rise in demand, as more buyers and sellers who have been sitting on the sidelines because of higher rates choose to make a move. That’s one big reason why experts are projecting an increase in home sales next year.

According to Fannie Mae, MBA, and NAR, total home sales are forecast to climb slightly, with an average of about 5.4 million homes expected to sell in 2025 (see graph below):

That would represent a modest uptick from the lower sales numbers in 2023 and 2024. For reference, about 4.8 million total homes were sold in 2023, and expectations are for around 4.5 million homes to sell this year.

While slightly lower mortgage rates are not expected to bring a flood of buyers and sellers back to the market, they certainly will get more people moving. That means more homes available for sale – and competition among buyers who want to purchase them.

Home Prices Will Go Up Moderately

More buyers ready to jump into the market will put continued upward pressure on prices. Take a look at the latest price forecasts from 10 of the most trusted sources in real estate (see graph below):

On average, experts forecast home prices will rise nationally by about 2.6% next year. But as you can see, there’s a range of opinions on how much prices will climb. Experts agree, however, that home prices will continue to increase moderately next year at a slower, more normal rate. But keep in mind, prices will always vary by local market.

Bottom Line

Understanding 2025 housing market forecasts can help you plan your next move. Whether you’re buying or selling, staying informed about these trends will ensure you make the best decision possible. Let’s connect to discuss how these forecasts could impact your plans.

Markets • August 30, 2024

Are We Heading into a Balanced Market?

by Shawn Keane

Are We Heading into a Balanced Market?

If you’ve been keeping an eye on the housing market over the past couple of years, you know sellers have had the upper hand. But is that going to shift now that inventory is growing? Here’s a breakdown of what you need to know.

What Is a Balanced Market?

A balanced market is generally defined as a market with about a five-to-seven-month supply of homes available for sale. In this type of market, neither buyers nor sellers have a clear advantage. Prices tend to stabilize, and there’s a healthier number of homes to choose from. And after many years when sellers had all the leverage, a more balanced market would be a welcome sight for people looking to move. The question is – is that really where the market is headed?

After starting the year with a three-month supply of homes nationally, inventory has increased to four months. That may not sound like a lot, but it means the market is getting closer to balanced – even though it’s not quite there yet. It’s important to note this increase in inventory is not leading to an oversupply that would cause a crash. Even with the growth lately, there’s still nowhere near enough supply for that to happen.

The graph below uses data from the National Association of Realtors (NAR) to give you an idea of where inventory has been in the past, and where it’s at today:

For now, this is still seller’s market territory – it’s just not as frenzied of a seller’s market as it’s been over the past few years. As Mark Fleming, Chief Economist at First American, says:

“The faster housing supply increases, the more affordability improves and the strength of a seller’s market wanes.”

What This Means for You and Your Move

Here’s how this shift impacts you and the market conditions you’ll face when you move. Lawrence Yun, Chief Economist at NAR, explains:

“Homes are sitting on the market a bit longer, and sellers are receiving fewer offers. More buyers are insisting on home inspections and appraisals, and inventory is definitively rising on a national basis.”

The graphs below use the latest data from NAR and Realtor.com to help show examples of these changes:

Homes Are Sitting on the Market Longer: Since more homes are on the market, they’re not selling quite as fast. For buyers, this means you may have more time to find the right home. For sellers, it’s important to price your house right if you want it to sell. If you don’t, buyers might choose better-priced options.

Sellers Are Receiving Fewer Offers: As a seller, you might need to be more flexible and willing to compromise on price or terms to close the deal. For buyers, you could start to face less intense competition since you have more options to choose from.

Fewer Buyers Are Waiving Inspections: As a buyer, you have more negotiation power now. And that’s why fewer buyers are waiving inspections. For sellers, this means you need to be ready to negotiate and address repair requests to keep the sale moving forward.

How a Real Estate Agent Can Help

But this is just the national picture. The type of market you’re in is going to vary a lot based on how much inventory is available. So, lean on a local real estate agent for insight into how your area stacks up.

Whether you’re buying or selling, understanding how the market is changing gives you a big advantage. Your agent has the latest data and local insights, so you know exactly what’s happening and how to navigate it.

Bottom Line

The real estate market is always changing, and it’s important to stay informed. Whether you’re buying or selling, understanding this shift toward a balanced market can help. If you have any questions or need expert advice, don’t hesitate to reach out.

Mortgage Rates • August 9, 2024

How the Economy Impacts Mortgage Rates

by Shawn Keane

How the Economy Impacts Mortgage Rates

As someone who’s thinking about buying or selling a home, you’re probably paying close attention to mortgage rates – and wondering what’s ahead.

One thing that can affect mortgage rates is the Federal Funds Rate, which influences how much it costs banks to borrow money from each other. While the Federal Reserve (the Fed) doesn’t directly control mortgage rates, they do control the Federal Funds Rate.

The relationship between the two is why people have been watching closely to see when the Fed might lower the Federal Funds Rate. Whenever they do, that’ll put downward pressure on mortgage rates. The Fed meets next week, and three of the most important metrics they’ll look at as they make their decision are:

The Rate of Inflation
How Many Jobs the Economy Is Adding
The Unemployment Rate

Here’s the latest data on all three.

1. The Rate of Inflation

You’ve probably heard a lot about inflation over the past year or two – and you’ve likely felt it whenever you’ve gone to buy just about anything. That’s because high inflation means prices have been going up quickly.

The Fed has stated its goal is to get the rate of inflation back down to 2%. Right now, it’s still higher than that, but moving in the right direction (see graph below):

2. How Many Jobs the Economy Is Adding

The Fed is also watching how many new jobs are created each month. They want to see job growth slow down consistently before taking any action on the Federal Funds Rate. If fewer jobs are created, it means the economy is still strong but cooling a bit – which is their goal. That appears to be exactly what’s happening now. Inman says:

“. . . the Bureau of Labor Statistics reported that employers added fewer jobs in April and May than previously thought and that hiring by private companies was sluggish in June.”

So, while employers are still adding jobs, they’re not adding as many as before. That’s an indicator the economy is slowing down after being overheated for quite some time. This is an encouraging trend for the Fed to see.

3. The Unemployment Rate

The unemployment rate is the percentage of people who want to work but can’t find jobs. So, a low rate means a lot of Americans are employed. That’s a good thing for many people.

But it can also lead to higher inflation because more people working means more spending – which drives up prices. Right now, the unemployment rate is low, but it’s been rising slowly over the past few months (see graph below):

It may seem harsh, but a consistently rising unemployment rate is something the Fed needs to see before deciding to cut the Federal Funds Rate. That’s because a higher unemployment rate would mean reduced spending, and that would help get inflation back under control.

What Does This Mean Moving Forward?

While mortgage rates are going to continue to be volatile in the days and months ahead, these are signs the economy is headed in the direction the Fed wants to see. But even with that, it’s unlikely they’ll cut the Federal Funds Rate when they meet next week. Jerome Powell, Chair of the Federal Reserve, recently said:

“We want to be more confident that inflation is moving sustainably down toward 2% before we start the process of reducing or loosening policy.”

Basically, we’re seeing the first signs now, but they need more data and more time to feel confident that this is a consistent trend. Assuming that direction continues, according to the CME FedWatch Tool, experts say there’s a projected 96.1% chance the Fed will lower the Federal Funds Rate at their September meeting.

Remember, the Fed doesn’t directly set mortgage rates. It’s just that whenever they decide to cut the Federal Funds Rate, mortgage rates should respond.

Of course, the timing of when the Fed takes action could change because of new economic reports, world events, and other factors. That’s why it’s usually not a good idea to try to time the market.

Bottom Line

Recent economic data may signal that hope is on the horizon for mortgage rates. Let’s connect so you have an expert to keep you up to date on the latest trends and what they mean for you.