With the global economy still in rebalancing mode, the first half of 2024 hasn’t gone as real estate experts expected. We know interest rates are among the most critical factors buyers, sellers, and investors must consider as they make moves (or sit on the sidelines). So we at RE/MAX Alliance keep close watch of the Federal Reserve's Fed rate and the economic conditions the Federal Reserve Committee utilizes to make rate adjustments.
Who is the Federal Reserve?
As we explained in a previous blog, the Fed will drop and stabilize interest rates once our economy slows down. In March we received promising news from the Fed that rate cuts would happen sooner than later. But since the financial conditions haven’t really budged, the Fed Rate is staying high for the time being:
Job Market
Continuing to make slight shifts, the latest Jobs Report shows the unemployment rate bumped up to 3.9% in April (compared to 3.8% in March, and 3.9% in February). The Federal Reserve wants unemployment to hit 4.4% (we haven’t hit 4% in over two years). New jobs surprised us. According to the Bureau of Labor Statistics (BLS), employment in April increased by 175,000, which is less than expected (January = 353,000, February = 275,000, March = 303,000).
Consumer Spending
To ensure the economy is more balanced, the Federal Reserve wants to see a significant drop in spending (mainly areas like retail and housing). We may be heading that direction. The first quarter of 2024’s GDP (Gross Domestic Product) only grew by 1.6%. Q4 of 2023 was +3.4% and Q3 was +4.9%.
Inflation
2.2% is the Federal Reserve’s goal. However, the latest Core CPI (Consumer Price Index that excludes food and energy) saw a 0.3% increase to 3.6% Granted this is the first time since December since it has slightly slowed down (Jan-Mar it consistently grew 0.4%). In particular retail’s growing prices are holding up far better than many analysts expected.
Could rates drop this year? It is a big maybe. Our economy’s stubborn trends puts us at risk for more inflation. So traders are echoing the Fed’s stance: the fight against inflation is far from over. The Federal Reserve will keep rates "higher for longer" for the coming months.
But there are silver linings!
- The Federal Reserve Committee does not plan to increase the rate! Considering we experienced several hikes in 2023, this is welcomed news.
- With interest rates only making small fluctuations, that stability gives homebuyers confidence to their strategy will succeed in this market.
- Buyers have adapted to interest rates hovering in the 7s. Our spring market along the Front Range picked up steam and many communities had more homes for sale than the last two years.
Sure, our current home sales numbers are lower along the Front Range, but that is due to the lack of transactions which can occur given our low inventory.
You can still find success in 2024
Buyers, if you can afford a monthly mortgage payment, make a move soon. With markets slowing down for the summer, you have more negotiating power now than over the last few years. Your RE/MAX Alliance Agent will empower you with local market data and strategies to reduce your purchasing costs. Sellers, using traditional tactics (home improvements, staging, excellent marketing), can improve your return. Summer is the optimal time to prepare your home for the busier fall market. Talk with your RE/MAX Alliance agent as soon as possible to start preparations.
