Fed Up Rates Down! How the Real Estate Market Reacted to the Fed Pivot

[Aaron Morrow]

The recent Federal Reserve meeting has sparked much discussion, particularly around the rate changes. It's essential to understand the broader context of these adjustments and their implications. Here’s an analysis of the key takeaways:

Economic Growth and GDP Forecasts: A slowdown in the economy from its previous quarter's robust performance is noticeable. However, GDP growth is still expected to be strong at around 2.5% for the year. Looking forward, the Fed has updated its 2023 GDP growth forecast to 2.6%, a notable increase from earlier predictions.

Inflation and Monetary Policy: Inflation is showing signs of cooling, with a gradual decrease projected by the Fed to reach 2% by 2026. Concurrently, the Federal Reserve continues to allow up to $95 billion monthly to roll off its balance sheet from maturing bonds, maintaining its current approach to policy tightening.

Federal Reserve's Interest Rate Decision: The key interest rate remains steady, with the Federal Reserve maintaining it at 5.25%-5.5% for the third time in a row. This stability is a significant factor in the current economic setting.

Predictions for Upcoming Rate Cuts: The Federal Open Market Committee (FOMC) has indicated the possibility of three rate cuts in 2024, each by a quarter-point. This development is less aggressive than market expectations but still marks a change in direction from prior Fed communications.

Market Reactions and Wall Street's Expectations: Following the Fed's announcement, the Dow Jones surged past the 37,000 mark, reflecting the market's response to the rate decision. However, Wall Street anticipates more aggressive rate cuts than what the FOMC suggests, expecting a total reduction of 1.5 percentage points next year.

The U.S. Job Market Outlook: The unemployment rate is forecasted to stay relatively steady, with projections at 3.8% for 2023 and a slight uptick in subsequent years.

Federal Reserve's Strategic Approach: The Fed is carefully balancing its response to inflation risks and economic indicators. They are ready to adjust rates if needed, but also showing patience in evaluating the effects of their prior policy decisions.

Impact on Local Mortgage Rates: In light of these economic shifts, some mortgage rates in the local market have seen a decrease, potentially making home buying more affordable. It’s a timely opportunity for market participants to reassess their options in light of these new rates.

This comprehensive understanding is vital for anyone interested in the real estate market and the broader economic trends.

With all that being said, what are you all seeing out there if you are actively buying in this Greater Seattle market? :) 

[John Morgan]

I expect mortgage and refi applications to jump quite a bit in the next 6-12 months now that rates are coming down. This will keep the housing market strong. And I expect properties in most demand (SFH under the median price) will jump in price due to very now inventory and very high demand. Rent for SFR will rise 5-% or more in low inventory markets. 2024 could be a wild ride!