How the Economy Impacts Mortgage Rates
As someone who’s thinking about buying or selling a home, you’re probably paying close attention to mortgage rates – and wondering what's ahead.One thing that can affect mortgage rates is the Federal Funds Rate, which influences how much it costs banks to borrow money from each other. While the Federal Reserve (the Fed) doesn’t directly control mortgage rates, they do control the Federal Funds Rate.The relationship between the two is why people have been watching closely to see when the Fed might lower the Federal Funds Rate. Whenever they do, that’ll put downward pressure on mortgage rates. The Fed meets next week, and three of the most important metrics they’ll look at as they make their decision are:▶️ The Rate of Inflation▶️ How Many Jobs the Economy Is Adding▶️ The Unemployment RateHere’s the latest data on all three.1. The Rate of InflationYou’ve probably heard a lot about inflation over the past year or two – and you’ve likely felt it whenever you’ve gone to buy just about anything. That’s because high inflation means prices have been going up quickly.The Fed has stated its goal is to get the rate of inflation back down to 2%. Right now, it’s still higher than that, but moving in the right direction (see graph below):2. How Many Jobs the Economy Is AddingThe Fed is also watching how many new jobs are created each month. They want to see job growth slow down consistently before taking any action on the Federal Funds Rate. If fewer jobs are created, it means the economy is still strong but cooling a bit – which is their goal. That appears to be exactly what’s happening now. Inman says:“. . . the Bureau of Labor Statistics reported that employers added fewer jobs in April and May than previously thought and that hiring by private companies was sluggish in June.”So, while employers are still adding jobs, they’re not adding as many as before. That’s an indicator the economy is slowing down after being overheated for quite some time. This is an encouraging trend for the Fed to see.3. The Unemployment RateThe unemployment rate is the percentage of people who want to work but can’t find jobs. So, a low rate means a lot of Americans are employed. That’s a good thing for many people.But it can also lead to higher inflation because more people working means more spending – which drives up prices. Right now, the unemployment rate is low, but it’s been rising slowly over the past few months (see graph below):It may seem harsh, but a consistently rising unemployment rate is something the Fed needs to see before deciding to cut the Federal Funds Rate. That’s because a higher unemployment rate would mean reduced spending, and that would help get inflation back under control.What Does This Mean Moving Forward?While mortgage rates are going to continue to be volatile in the days and months ahead, these are signs the economy is headed in the direction the Fed wants to see. But even with that, it’s unlikely they'll cut the Federal Funds Rate when they meet next week. Jerome Powell, Chair of the Federal Reserve, recently said:“We want to be more confident that inflation is moving sustainably down toward 2% before we start the process of reducing or loosening policy.”Basically, we’re seeing the first signs now, but they need more data and more time to feel confident that this is a consistent trend. Assuming that direction continues, according to the CME FedWatch Tool, experts say there’s a projected 96.1% chance the Fed will lower the Federal Funds Rate at their September meeting.Remember, the Fed doesn’t directly set mortgage rates. It’s just that whenever they decide to cut the Federal Funds Rate, mortgage rates should respond.Of course, the timing of when the Fed takes action could change because of new economic reports, world events, and other factors. That’s why it's usually not a good idea to try to time the market.Bottom LineRecent economic data may signal that hope is on the horizon for mortgage rates. Let’s connect so you have an expert to keep you up to date on the latest trends and what they mean for you. Aurhomes Group is here to help!
Why Working with a Real Estate Professional Is Crucial Right Now
Navigating the housing market can be tricky, especially these days. That's why having an experienced guide when buying or selling a home is so important. The market isn't exactly straightforward right now, and working with a real estate expert can offer insights and advice that make all the difference.While today’s market conditions might seem confusing or overwhelming, you don't have to handle them alone. With a trusted expert leading you through every step, you can navigate the process with the clarity and confidence you deserve.Here are just a few of the ways a real estate expert is invaluable:Contracts – Agents help with the disclosures and contracts necessary in today’s heavily regulated environment.✅ Experience – In today’s market, experience is crucial. Real estate professionals know the entire sales process, including how it’s changing right now.✅ Negotiations – Your real estate advisor acts as a buffer in negotiations with all parties, and advocates for your best interests throughout the entire transaction.✅ Industry Expertise– Knowledge is power in today’s market, and your advisor will simply and effectively explain processes, market conditions, and key terms, translating what they mean for you along the way along the way.✅ Pricing – A real estate professional understands current real estate values when setting the price of your home or helping you make an offer to purchase one. Pricing matters more than ever right now, so having expert advice will help ensure you’re set up for success.A real estate agent is a crucial guide through this challenging market, but not all agents are created equal. A true expert can carefully walk you through the whole real estate process, look out for your unique needs, and advise you on the best ways to achieve success.Finding an expert real estate advisor – not just any agent – should be your top priority if you want to buy or sell a home. As Bankrate says:"Real estate is very localized, and you want someone who’s extremely knowledgeable about the market in your specific area. You should also look for someone with a successful track record of negotiating and closing deals, preferably for homes similar to the kind you want to buy."What’s the Key To Choosing the Right Expert?Like any relationship, it starts with trust. You’ll want to know you can depend on that person to always put you and your best interests first. That means hiring a true professional. As Business Insider explains:“As long as you've properly vetted the agents you're considering and ensured they have the necessary expertise, it's ok to go with your gut when making your final decision on which real estate agent you want to work with. You're going to be working closely with this person, so it's important to choose an agent you're comfortable with."Bottom LineIt’s critical to have an expert on your side who’s well-versed in navigating today’s housing market dynamics. If you’re planning to buy or sell a home this year, let’s connect so you have a real estate professionals to give you the best advice and guide you along the way.
Why Your Asking Price Matters Even More Right Now
If you’re thinking about selling your house, here’s something you really need to know. Even though it’s still a seller’s market today, you can’t pick just any price for your listing.While home prices are still appreciating in most areas, they’re climbing at a slower pace because higher mortgage rates are putting a squeeze on buyer demand. At the same time, the supply of homes for sale is growing. That means buyers have more options and your house may not stand out as much, if it’s not priced right.Those two factors combined are why the asking price you set for your house is more important today than it has been in recent years.And some sellers are finding that out the hard way. That’s leading to more price reductions. Mike Simonsen, Founder and President of ALTOS Research, explains:“Looking at the price reductions data set . . . It all fits in the same pattern of increasing supply and homebuyer demand that is just exhausted by high mortgage rates. . . As home sellers are faced with less demand than they expected, more of them have to reduce their prices.”That’s because they haven’t adjusted their expectations to today’s market. Maybe they’re not working with an agent, so they don’t know what’s happening around them. Or they’re not using an agent who prioritizes being a local market expert. Either way, they aren’t basing their pricing decision on the latest data available – and that’s a miss.If you want to avoid making a pricing mistake that could turn away buyers and delay your sale, you need to work with an agent who really knows your local market. If you lean on the right agent, they’ll help you avoid making mistakes like:✅ Setting a Price That’s Too High: Some sellers have unrealistic expectations about how much their house is worth. That’s because they base their price on their gut or their bottom line, not the data. An agent will help you base your price on facts, not opinion, so you have a better chance of hitting the mark.✅ Not Considering What Houses Are Actually Selling for: Without an agent’s help, some sellers may use the wrong comparable sales (comps) in their area and misjudge the market value of their home. An agent has the expertise needed to find true comps. And they’ll use those to give you valuable insights into how to price your house in a way that’s competitive for you and your future buyer.✅ Overestimating Home Improvements: Sellers who have invested a significant amount of money in home improvements may overestimate how much those upgrades affect their home's value. While certain improvements can increase a home's appeal, not all upgrades are going to get a great return on their investment. An agent factors in what you’ve done and what buyers in your area actually want as they set the price.✅ Ignoring Feedback and Market Response: Some sellers may be resistant to lowering their asking price based on feedback they’re getting in open houses. An agent will remind the seller how important it is to be flexible and respond to market feedback in order to attract qualified buyers. In the end, accurate pricing depends on current market conditions – and only an agent has all the data and information necessary to find the right price for your house. The right agent will use that expertise to develop a pricing strategy that’s based on current market conditions and designed to get your house sold. That way you don’t miss the mark.Bottom LineThe right asking price is even more important today than it’s been over the last few years. To avoid making a costly mistake, connect with Aurhomes Group, and let’s work together.
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