Page 10 - February 2024 Issue.indd

DOLLARS AND SENSE by Tolbert Rowe

Feds and the Interest Rate

he Federal Reserve is the median rate being paid is under in homes on the market until we see
again front and center 4%. Who wants to sell their home that long-term interest rates get below 6%.

in determining what they are financing at 4% to get a new Rates in the 5s will be more acceptable
direction interest rates mortgage and pay 7%? to homeowners with 3%-4% mortgages
Twill go in 2024. The Fed than rates at 6.5% to 7%.

has made it clear that inflation of 2% This lack of inventory of homes for
is optimal. Some economists have sale has been frustrating for fi rst time Unfortunately, those who are looking
argued that 2% is too low for today’s buyers not only because there is not to buy now will need to continue to be
economy and a more realistic number much to look at but also because prices patient and diligent. And buyers who
is 2.25-2.50%. Regardless of what just seem to continue to go up. We may are sitting on the sidelines will need to
anyone thinks it should be, the current be at a point where prices are at least be content that inventory may not get
Federal Reserve under Jerome Powell starting to stabilize. better until later this year.
is directing monetary policy to reach a
When the real estate market has become When the December infl ation number
2%, year over year infl ation level.
constipated due to high rates and low came out at 3.4%, suddenly the Fed
When the inflation number came in inventory some event has to occur to easing of interest rates was pushed back
for November 2023 showing an anemic break it loose. Lower interest rates will from January 2024 to March, and that
.1% increase in year over year infl ation, be the laxative that will loosen up the may be a “big fat maybe.”

the stock and bond markets responded market. The $64,000 question is “when But as disappointing as this revelation
favorably, and economists quickly will that happen?” is for borrowers on the other side of the
concluded that the Fed would reduce
Many homes on the market are investor ledger it is good news for savers. At least
rates in 2024 as much as fi ve times.
owned. Either they are currently a for those who are able to have savings.

This set off a small decline in mortgage rental, and the owner/investor wants to The personal savings rate, which

rates of approximately 1% from 7.25 to take their profit, or they are fl ip houses is the amount of disposable income

8% range in October to 6.5% to 7% now, that are purchased fixed up and resold. American’s have each month aft er they
depending on loan program, loan term, Or they are homes where owners have have paid their expenses and taxes,
loan to value and credit scores. Hard to to sell due to relocation or retirement.
was 6%-6.5% prior to the pandemic.
believe that I am getting excited talking Buyers who want to sell their existing In April of 2020 it skyrocketed to
about interest rates under 7%. But this
home and move up to something bigger 30% when the pandemic lead to a
has not unlocked an increase in listings
have to be sellers fi rst. nationwide shutdown. It remained over
or homes available for sale since 82% 10% until July of 2021 as Americans’
of homeowners in this country with a It is my totally unscientific opinion that bank accounts swelled with “Covid

mortgage are paying less than 5%, and we will not see a significant increase money” and everybody got a check.
It is worth noting that the personal
savings rate remained elevated during
a period of over 10% while at the same
“Your Mortgage Consultant Since 1985”
time American families were adjusting
Purchase or Refinance to year over year inflation that averaged

7% in 2021 and 6.5% in 2022 from a
previous low of 1.4% in 2020.

In August of 2023 it dropped to 3.9%
and has dropped lower than this
115 E Dover St. Ste 3 - Easton, MD recently. The August number was the

tolbert@baycapitalmortgage.com C. Tolbert Rowe, most current I could fi nd.
www.baycapitalmortgage.com NMLS Vice President/Lending
182844 It was during these years of government
410-819-3005 / cell 410-310-3520 stimulus that mortgage rates fell to their
lowest levels ever. As distressing as the
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