There has been a slew of economic reports released lately that give the Federal Reserve, and financial markets differing stories on where interest rates should go.
The Federal Reserve has two primary goals dictated by its charter. Maintain maximum employment and stability of the financial system. Two of their tools, the Fed Funds Rate (The interest rate at which banks and other depository institutions lend money to each other, usually on an overnight basis), and the size of their balance sheet (QE – Quantitative Easing, where the Fed bought longer-term securities, QT – Quantitative Tightening, selling or allowing the securities to mature and fall off the balance sheet).
The Fed compensated for the Pandemic Shutdown by dropping it’s rate to 0%, and buying securities, resulting in artificially low mortgage rates. These among other elements (demographics, lack of construction, cyber working abilities, etc) stimulated housing and other asset prices. The Fed recognizes it was late in neutralizing their stimulative position, but now how fast/aggressive do they get on per se, taking away the punch bowl?
The Fed and financial markets have seen within one week’s time a hotter than expected employment report ($528,000 jobs created, double what was expected), and a lower inflation level (CPI 8.5% July year over year, from 9.1% June YOY). The Fed indicates they’ll be reacting to the data as it comes in. They increased the Fed Funds Rate .75% at their June and July meetings, but they don’t have another meeting till September. Two months of data will be in place before they meet again. Meanwhile, the financial markets continue to react to the data.
Note: Elements like commodity prices can move fast, the data from reports can be somewhat obsolete once received.
When the mortgage rate numbers are released by Freddie Mac and hit’s the media, it’s obsolete information. With a volatile financial market, mortgage rates can change a couple of times a day. The mortgage rates are over a full percent lower than at their highs in mid-June, but still a couple of percents higher than the artificially low levels at the beginning of the year (see mortgage chart).
If you are ever interested in up-to-the-minute rate or market information, feel free in contacting me.
If you are in the Los Angeles area, and have any questions or real estate sales or financing needs, feel free in contacting me
Ron Henderson GRI, SRES, SFR, RECS, CIAS
President/Broker
Multi Real Estate Services, Inc.
Gov’t Affairs Chair – California Association of Mortgage Professionals (2017-2018)
Chairman – OutWest Marketing Meeting (Real Estate Education)
BRE #00905793 NMLS #310358
www.mres.com
ronh@mres.com
Specialist in the Art of Real Estate Sales and Finance
Real Estate market, mortgage rates, Los Angeles, San Fernando Valley, Conejo Valley, Simi Valley, Woodland Hills, West Hills, Calabasas, Chatsworth
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