Fed Interest Rate Cuts Cont.

This is the first time in four years that the Federal Reserve cut interest rates. The Fed is convinced that inflation is easing and therefore we are now moving toward the stabilization or rather normalization of rates in a post-pandemic economy. Additionally, the decision to cut rates by the Fed is also due to the concern of a slowing labor market, as the unemployment rate continues to tick upwards of 4.0%.

The Fed's lowering rates by a half percentage point will be felt in the stock market, hiring, government bonds, mortgages and other loans. According to the economists, it is great news for the middle class as these cuts will actually strengthen the labor market by creating thousands of jobs!

In reference to the housing market and mortgage rates, there is some good news there as well. In anticipation of the rate cut by the Fed, 30-year fixed mortgage rates decreased to 6.2% in September 2024, from 7.18% just one year ago. 

The Pandemic wreaked havoc on the housing markets nationwide. The lack of congruence between high demand and low supply led to volatility for everyone, homeowners and renters alike. There is some expectation and wishful thinking that lower mortgage rates will increase the housing supply in the coming months because sellers who were reluctant to sell their houses due to the inability to purchase another property, will now put their houses on the market, thereby increasing supply and stabilizing prices. Likewise, financing cost will be friendlier to buyers.

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