The FED Just Changed The Tone — What Does This Mean for Housing?
This week gave us two very different signals about where the economy and interest rates could be headed.
Fed Chair Kevin Warsh delivered a tougher message on inflation at Jackson Hole, making it clear that the Fed is not ready to declare victory and could raise rates again if inflation doesn't improve.
At almost the same time, updated employment data showed the job market has been much weaker than previously reported.
So, are rates going up or down?
Right now, there isn't a simple answer.
But there is an opportunity to understand what could drive the next move and prepare before it happens.
📰 What’s Happening
THE FED ISN’T READY TO TALK ABOUT LOWER RATES
Fed Chair Kevin Warsh made one thing very clear at Jackson Hole: The Fed’s 2% inflation target isn't changing.
Warsh believes the economy and consumer remain relatively healthy, and he isn't convinced that recent improvements in inflation are enough to say the problem is solved. He stopped short of saying the Fed will raise rates, but made it clear that another increase remains an option if inflation doesn't cooperate. Another Fed official, Beth Hammack, went even further and said she believes rates should be raised now.
Translation:
The Fed isn't rushing to lower rates.
They want convincing evidence that inflation is under control before changing course.
BUT THE JOB MARKET IS TELLING A VERY DIFFERENT STORY
Here's where things get interesting.
New government revisions showed that job creation was even weaker than we previously thought.
The government originally estimated approximately 273,000 jobs were created over the measured year-long period.
That figure was revised lower by another 79,000 jobs — nearly 30%.
That works out to only around 16,000 new jobs per month.
Even more importantly, the weakness was concentrated in the private sector, while government employment was revised higher.
Translation:
Businesses aren't hiring at the pace we previously thought.
And that's important because a weakening job market is usually something the Fed cannot ignore indefinitely.
THE FED NOW HAS TWO COMPETING PROBLEMS
This is the part I want buyers and homeowners to understand. The Fed is essentially balancing:
Inflation that is still too high
versus
A job market that appears increasingly fragile.
Raise rates too aggressively and they risk putting additional pressure on consumers, businesses and employment.
Ease too soon and inflation could become a problem again.
That's why mortgage rates could remain volatile as new economic reports come out.
WHAT DOES THIS MEAN FOR MORTGAGE RATES?
Mortgage rates don't move solely because the Fed raises or lowers its benchmark rate.
They react every day to expectations about inflation, employment, economic growth and what the Fed may do next.
That's why markets initially moved sharply following Warsh's comments and then settled back down.
Translation:
We're in a market where one major inflation or employment report can quickly change expectations.
And that means opportunities can appear quickly too.
🏡 BUYERS
Don't interpret the Fed's tougher language as a reason to stop looking.
Instead, use this period to get positioned.
If rates improve following weaker employment or inflation data, you don't want to begin the preapproval process after everyone else notices.
Know your comfortable payment.
Know your buying power.
Know which homes you'd move on.
Then you're prepared if an opportunity appears.
🏷️ SELLERS
Today's buyers are extremely payment conscious.
That makes pricing, presentation and financing strategy more important than ever.
A well-positioned property combined with the right financing conversation can help overcome some of the affordability hesitation buyers are experiencing.
🔑 HOMEOWNERS
If you're sitting on a higher mortgage rate, you don't need to guess when refinancing will make sense.
Instead, establish your target rate and target savings now.
Then if the market reaches it, you already know whether the opportunity makes financial sense.
🚦THE KD TEAM TAKEAWAY: THIS IS A “GET READY” MARKET
This isn't a “rates are definitely going down” story.
And it isn't a “rates are definitely going higher” story either.
It's a market with two powerful forces pulling in opposite directions.
And when that happens, opportunities can come and go quickly.
So rather than trying to perfectly time the market:
Prepare for the number that makes sense for you.
For buyers, that's your target monthly payment.
For homeowners, that's your refinance target.
For sellers, that's the price and strategy that gets today's payment-conscious buyer to engage.
🚀 TURN THIS WEEK'S HEADLINES INTO A PERSONAL STRATEGY
Have a client wondering whether they should buy now, wait, refinance, or simply keep watching?
Send them our way.
We can build a personalized Opportunity Plan showing:
✓ Today's estimated payment
✓ Their target payment and rate
✓ How a future rate change affects buying power
✓ Buy Now vs. Wait scenarios
✓ Potential refinance break-even points
👉 Click “MY NUMBER” and we'll help identify the number that would make it worth taking action.
Because clients don't need another prediction about where rates are going.
They need to know exactly what they're waiting for.
KD Team
SOURCE: MBS Highway | Barry Habib and Team