Fed Keep Rates steady in March

Weekly Mortgage Update

Author

Michael Cassano
March 25, 2024

Hey everyone, hope you’re all doing well! Seems like we’ve all been caught up in guessing how the whole NAR settlement scenario is going to unfold, right? Looks like it’s going to be a hot topic for a bit as we wait and see how everything pans out.

Rates ended LOWER compared to last week, and volatility was LOW. Rates are back in the high 6’s for most loan types without paying discount points. Paying discount points can get you in the low-to-mid 6’s

Fed Keeps Rates Steady in March

Just as anticipated, Fed Chair Jerome Powell kept the Fed Funds Rate on hold this March, confirming the market's expectations of three rate cuts next year. This decision sent the S&P soaring to new heights, with mortgage rates seeing an improvement for the rest of the week.

Powell's comments were notably cautious, hinting at rate cuts once there's more certainty that inflation is under control. Initially, the markets had hoped for up to seven cuts in 2024, but now we're down to possibly three – and it's looking increasingly unlikely we'll see even one if the current economic and inflation trends persist.

A few rate cuts would certainly help the housing sector and businesses by lowering costs, but jumping the gun could risk inflating prices again.

Key Takeaway : Recent dialogues, including insights from Svenja Gudell, Indeed's chief economist, hint at a cooling job market, especially in high-paid and lower-wage sectors. Yet, without a clear downward trend in job data, the rush for a rate cut isn't there.

The real estate world has been buzzing with the implications of the NAR settlement, filled with both potentially good and bad news. Starting with the not-so-great: there's talk that the Department of Justice (DOJ) might step in, which could complicate matters further, potentially leading to more stringent outcomes compared to the settlement.

For instance, looking at the recent DOJ action against Apple, we can get a sense of what might happen if they decide to tackle real estate commissions, possibly ending the practice of sellers covering buyer agent fees.

On a brighter note: whispers suggest Fannie Mae and Freddie Mac are exploring ways to incorporate buyer agent commissions into mortgages, offering a glimmer of hope for a smoother path ahead. Nothing’s set in stone yet, though.

Key Takeaway: The dust is far from settled on the commission front. We're all hoping for a solution that keeps the DOJ at bay and supports a thriving real estate market.

The “Lock-In Effect” and Its Market Impact

Diving into the Federal Housing Finance Agency's report brings to light the substantial impact of the "lock-in effect." Homeowners opting to stay put because of their low mortgage rates have significantly influenced the housing market, likely holding back about 1.3 million homes from being listed between mid-2022 and late 2023. This hesitation has played a key role in driving up national home prices by an unexpected 5.7%, a notable shift considering the anticipated decline in prices due to higher mortgage rates. Such reluctance not only limits homeowners from moving to homes that might better suit their current needs but also contributes to escalating home prices, making affordability an even greater hurdle.

The disparity highlighted by the report is particularly concerning, showing how this trend disproportionately affects those with less financial flexibility, making it difficult for them to time the market to their benefit and widening the gap in housing accessibility.

Key Takeaway: While the lock-in effect seems poised to continue as long as rates remain elevated, there's a small sign of hope with a slight increase in new listings this February compared to last year. It suggests some homeowners might be ready to move on, regardless of mortgage rate challenges.

As we step into a new week, I encourage you to keep adapting and navigating these shifts in the real estate landscape. With patience and strategic planning, you'll find innovative ways to support your clients and thrive amidst the changes. Here's to seizing opportunities and tackling challenges in the ever-evolving real estate market!