Stay the Course or Deploy Interest Rate Cuts in 2024?

Depending on who you read, it could be either! Recent articles talk about the Fed’s desire to stay the course until inflation is more under control, others, such as Housing Wire said that the Feds are going to deploy rate cuts not because “the labor market breaking, but because real rates are too high”. And what does that have to do with us?

The “shelter inflation” is 44.4% of the consumer price index, so it is the most significant component. Back in December, the 10-year yield had fallen from its peak of around 5% to 4.2% which should have driven mortgage rates less than 6%, but they did not.

Gary Keller said in a recent meeting that while the nation was not in recession, housing was in a recession. In most markets, including ours, inventory remains low, interest rates remain high over the last 5-year average, yet prices do not seem to be decreasing.

Some recent reports I have seen show rental rates declining, but in 2 markets that we are considering, we actually see them increasing.

Unsettled times require more diligent analysis. Interest rates certainly affect the individual consumer purchasing a home just like they affect the cashflow on a project a developer is considering. Finding that balance is becoming more difficult, but as we said, it requires more thorough analysis.

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