The first of many!
Yes, we finally got a FED rate cut and while the FED has had a long-standing policy not to move the needle on interest rates in a presidential election year, it looks like Jerome Powell didn’t want to end his tenure as FED Chairman letting the economy fall into a deep recession. While I am happy to see the 50bps cut at this meeting, I would have preferred he made this move much earlier and measure out the decline a little bit at a time. However, better late than never, and if Mr. Powell is truly looking to move the FED back to a neutral position; we can fully expect a series of cuts well into next year. How far it goes will likely depend on far too many events, some of which are not on anyone’s radar now. It is a first step and once the yield curve straightens out, we can see how far we are likely to go once we see the effects of future cuts, the election, policy changes, and the reaction to all of this and more in the economy. It is a positive sign.
Mortgage applications for both purchase and refinances are doing better, although more than half of the applications are refinances. I wonder if any of those who are refinancing now were even offered information about the benefits of selling their home and locking up their forever home before home prices move higher? Saving money on a monthly payment is great; but locking in your costs on what is likely your single biggest purchase and having the ability to refinance that debt in the future if rates continue to fall is better! We have heard it over an over again, there is a significant housing shortage in this country and there is no appetite now to even build as many homes as possible to keep pace with the population grown and new household formations, much less reduce the backlog any time soon! Locking in your price on your forever home now is a great idea because lower rates may also push home prices HIGHER!
Fun fact, many originators have jumped into refinance mode so hard that those who have remained balanced are seeing a considerable uptick in purchase business from referral sources that have been abandoned! Stay balanced, stay in BUSINESS!
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