The Fed announced it would maintain its benchmark interest rate at 5.25%-5.50% for the fifth consecutive meeting. This decision, reached on March 20 by the Federal Open Market Committee, leaves financial markets and observers looking ahead to June, where the first rate cut is highly anticipated, one of three cuts penciled in for 2024. Holding the rate constant once again underscores the Fed’s cautious approach toward balancing economic growth with inflation control.
Powell Highlighted Inflation Data Supports Decision to Delay Action
Key inflation indicators – the Consumer Price Index and Personal Consumption Expenditure, revealed an upward trend throughout January and February. Federal Reserve Chairman Jerome Powell interprets this as additional evidence of inflation’s non-linear downward path.
He elaborates, “I think they haven’t really changed the overall story, which is that of inflation moving down gradually on a sometimes bumpy road toward 2%.” In a related comment, he justifies their decision to hold off on rate cuts, “If you look at the incoming inflation data that we’ve had for January and February, I think very broadly it suggests we were right to wait until we’re more confident.”
Concerning the employment sector, which they say is in good shape with very low jobless claims, Powell emphasized that it wouldn’t discourage the central bank from reducing rates, and backed this up when he noted, “Strong hiring in and of itself would not be a reason to hold off on rate cuts.”
Record Highs Across Major Indexes Following Meeting
The Federal Reserve’s announcement caused a significant rally across the stock market, treasury bonds, and the gold market. The stock market witnessed substantial gains, with the Dow Jones, S&P 500, and Nasdaq all soaring to record highs, an event that hasn’t happened since November 2021.
The S&P 500 notably broke through the 5,200 mark for the first time, ending the day at a record close of 5,224.62, a clear sign of investor optimism towards the Fed’s economic outlook and its indication of potential rate cuts ahead.
The price of gold also soared to record levels in response to the Federal Reserve’s policy announcement. Gold prices are projected to rise to $2,300 per ounce in the last half of 2024, particularly in light of anticipations that the Federal Reserve might lower interest rates during the same period. Gold has always remained a hedge against monetary policy shifts and economic volatility, attracting investor interest in the process.
Rise in Mortgage Rates Edges Closer to Seven Percent
According to industry analysts, the average 30-year fixed mortgage rate, which stood at 6.74% for the week ending March 14, but rose today, March 21, to 6.87%, is expected to gradually recede over the next year. Crystal Sunbury, RSM U.S. real estate senior analyst, suggests, “Assuming no significant economic shocks, mortgage rates are likely to continue slowly easing over the next few months, to reach a 6% to 6.5% range by spring of 2024.”
The Mortgage Bankers Association extends their prediction out further, expecting mortgage rates to end 2024 at 6.1% and further decline to 5.5% by the end of 2025.
The Fed’s current pause on rate adjustments signals to home buyers that although immediate relief in mortgage rates may not be just around the corner, there is potential for gradual improvement in affordability over the coming months. However, with mortgage rates on the rise this week, it could make for a rocky spring buying season, ultimately keeping the waiting game going for just a little longer.
U.S Weekly Average 30-Year Mortgage Rates as of 03/21/2024
With mortgage rates higher, buyers are not expected to flood the housing market just yet. This gives real estate investors the opportunity to buy at a time when bidding wars won’t be through the roof, as they are expected to be when rates settle down.
In addition to this, although mortgage rates for owner-occupied single-family properties are nearing 7%, and investment property loan rates are inching towards 8%, lower rates are actually available. Currently, Morris Invest can offer rates around the 6.4% mark, and we’re able to provide competitive rates such as this because we work with over 200 banks.
Now is the time to jump into the market and grab a new construction rental property before the market floods when rates start to decline. If you’re worried about locking in high rates, know that you’ll be able to refinance when rates dip – you can change your interest rate, but you can’t change the price you paid for a property. Additionally, investing now will enable you to capture large equity gains as housing prices continue to surge.
Related Article: Harnessing the Power of Home Equity to Buy a Rental Property
If you’d like to secure a property through Morris Invest, we can take care of all the details for you, including placing a tenant in your rental and assigning a professional property manager. Feel free to schedule a complimentary 30-minute call so we can fill you in on all the details of our rental properties, and explain how we can help set you on the path to financial independence. You can learn more about what we offer by heading over to the Morris Invest & SDIRA Program Overview page.
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