The Fed announcement of a 25 basis point rate hike was welcome news to the financial markets sending Mortgage Backed Security prices up and 10 year Treasury Yields down. By now my regular readers are so savvy you can conclude….yes, mortgage rates dipped today!
Rate forecast
The omission of the statement “ongoing increases” from the announcement was replaced in the Fed’s press release with “some additional policy firming may be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2 percent over time”.* Translation, The Fed is slowing increases in an effort to allow the changes to make an impact.
A forecast among members of the Federal Open Market Committee echoed a slowdown in hikes suggesting we may only see one more federal funds increase in 2023. While the Federal funds rate doesn’t directly dictate mortgage rates, it does respond to inflation as do mortgage rates. (Mortgage rates move in the same direction as Core CPI)
A calming of inflation will be a step in the right direction for the housing market, keeping rates and home prices steady.
The health of the banking system
Fed Chairman Jerome Powell addressed the issue briefly by saying the challenges were limited to a “few banks” and offered confidence our financial system remains sound.* Fairway Independent Mortgage Corporation is a private mortgage bank and does not work with depositors as do the lenders within the major banks. I want to reassure you, all clients working with Fairway will continue to receive competitive rates and the same great service you’ve come to expect.
Here’s hoping
Our final hiccup to a healthier housing market with no clear solution is the supply of homes. Here’s hoping this hint of economic optimism combined with a long-term view of a steadier financial market brings buyers and sellers back into the market and builders react by jumping back in the game.
And home prices…
Predictions for home prices across the country remain mostly flat among analysts. In January, median existing-home sale prices were up 1.3% over a year ago. February reversed the trend according to the National Association of Realtors as the median home price inched down with a 0.2% slip as compared to February 2022.
Those home price crash enthusiast awaiting the price plummet, no foreseeable chance of that. Mortgage application data remains strong, home supply is exceptionally tight and forbearance rates declined 4 basis points again in February as tracked by the Mortgage Bankers Association (MBA).
The takeaway
From housing supply challenges to mortgage rates and the overall economy, there is no such thing as timing the market. Who could predict the pandemic and its impact? Who knows how fast inflation will back off? What we do know is real estate consistently performs well overtime and there are NO red flags driving home prices down significantly. As a 30-year industry veteran my advice is, if you need a home get shopping. If you wait until supply increases, inflation slows, and mortgage rates tip downward, get ready to sharpen your bidding pencil. You and EVERYONE else will be home shopping.
*Comments from Jerome Powell referenced in the FOMC press release dated March 22, 2023
Written by TheLandisGroup
