The Fed's Rate Hikes have Gotten Smaller and Less Frequent

The Federal Reserve has announced its intention to cut borrowing costs three times in 2024. This decision comes after a series of smaller and less frequent rate hikes in recent months.

 According to the New York Times (NYT):

“Federal Reserve officials left interest rates unchanged in their final policy decision of 2023 and forecast that they will cut borrowing costs three times in the coming year, a sign that the central bank is shifting toward the next phase in its fight against rapid inflation.”

The Fed's decision is based on the cooling of inflation, which is seen as a signal that the previous rate increases have been effective.

"The Federal Funds Rate Hikes Have Stalled

One of the Fed’s primary goals is to lower inflation. In order to do that, they started raising the Federal Funds Rate to slow down the economy. Even though this doesn’t directly dictate what happens with mortgage rates, it does have an impact.

Recently inflation has started to cool, a signal those increases worked and are bringing inflation back down. As a result, the Fed’s hikes have gotten smaller and less frequent. In fact, there haven’t been any increases since July (see graph above):

Mortgage Rates Are Coming Down

Mortgage rates are influenced by a wide variety of factors, and inflation and the Fed’s actions (or as has been the case recently, inaction) play a big role. Now that the Fed has paused the increases, it looks more likely mortgage rates will continue their downward trend (see graph above): "According to Keeping Current Matters

What does this mean for the Real Estate Market?

A decrease in mortgage rates will improve affordability for buyers and make it easier for sellers to move since they won’t feel as locked-in to their current, low mortgage rate. A problem that seems to be at the forefront of the limited inventory and supply of housing.

Contact me today if you want to discuss this topic or want to plan your next move.