What’s Happening with Interest Rates?

I have good news concerning future interest rates.  After the last federal reserve meeting, the Fed announced that they would probably do one more rate hike before the end of the year.  The residential mortgage interest rates responded by raising right after that announcement.  Reuters reported on Monday that, “top ranking Federal Reserve officials indicated..that rising yield on long-term US Treasury bonds..could steer the Fed from further increases.”  That means that the mortgage market raised interest rates on its own, so they do not have to increase interest rates again.  The Fed vice chair, Philip Jefferson, said they they are balancing the risk of not tightening enough and being too restrictive.  The Fed says they do not want to do unnecessary harm to the economy.
The National Association of Realtors, The Home Builder’s Association, and the Mortgage Banker’s Association penned a letter to the Fed chairman telling him that the interest rate increases are, “exacerbated housing affordability and created additional disruptions for a real estate market that is already straining to adjust to a dramatic pullback in both mortgage origination and home sale volume.”  They went on to say that further rate increases pose a wide spread risk to economic growth and increase the likelihood of a recession.  Real estate makes up 16% of the US economy so further rate increases would create a hard landing rather than the soft landing that the Fed has been hoping for. NAR Chief Economist Lawrence Yun said, “The fast-rising interest rates are breaking several sectors of the economy. The remaining sectors will also likely crack if the rate hikes continue. Given that the inflation rate is already cooling, the Fed needs to stop raising rates and strongly consider cutting interest rates next year. That would be the ‘soft landing’ without the net job cuts to the economy.”  Basically, there is a decent chance that we may have seen our last interest rate hike.
The other bit of good news is that late fall is a great time to buy a home for a little less.  Even though the interest rate is high now, when rates go down next year, the pent up home buyer demand from this year will hit the market making people have to pay more for a home in order to get to an accepted contract.  When rates go down, you can refinance after having paid a lower price for the house than if you wait for rates to go down again.  Call Nathan Walldorf to find your Chattanooga home today. 423-544-7700.