The Fed and the Biden Administration seemed to have felt confident in reassuring America about how strong the jobs market was and the ongoing need to manage inflation. As a result, the Fed just hiked the Federal Funds Rate by another 25 basis points last week.
While Biden celebrates how strong the job market is, reality in the U.S. economy seems to be indicating to the contrary.
Is the jobs market really as strong Biden proclaims? Is US job growth truly the strongest today when compared to the entire history of the United States? Biden sure seems to think so.
Since January of this year (2023), given the number of layoffs, it would be challenging to understand Biden's opinion about recent US job growth.
With more than 121,000 layoffs in just the technology industry between January and February 2023, we continue to find it hard to believe how strong our job growth in the United States really is. Not to mention the collapse of Silicon Valley Bank (the largest bank failure in US history) and the collapse of Signature Bank (the third largest bank failure in US history) - both of which occurred within weeks of one another.
However, given the recent bank collapses and thousands of layoffs since January 1, 2023, the market appears to state otherwise. As a result, mortgage rates have settled down a bit. Hopefully, the market will continue to force transparency long enough for the administration and Fed to stop hiking the Fed Rate.
The list of layoff announcements continue as Biden's reassurance of our job growth piddles into reality.
If the market is truly correcting and continues in this direction, we can expect mortgage rates to continue falling.
The recent Rent growth report indicates more evidence that inflation has begun cooling. US housing costs, particularly rent growth accounts for approximately one-third of the overall inflation index.
Source: Dani Romero with Yahoo!news states that “a cooldown in the housing market has started to spill into rents…”
Housing costs accounted for over 70% of the increase in February and [were] the largest contributor to the monthly growth rate," Jeffrey Roach, chief economist at LPL Financial, wrote in a statement following the release. "This component will not likely be a significant driver of inflation by year end as more multifamily units come to market."
Upside - Lower rates obviously means more buying power for homebuyers.
Downside – Lower rates will increase housing demand when housing inventory levels are already at historic lows. Driving more housing demand when housing inventory levels are low will likely result in a continued increase in housing prices.
Best advice I can share is that it’s never too soon to buy American real estate. Waiting for prices to drop will result in a waiting period that may never end. Waiting for rates to drop may only cost more in real estate purchase prices. And waiting for prices AND rates to drop, well, if that happens, we may have much bigger things to worry about.
Date the rate, marry the home.
While rates are down a bit and home values haven’t ticked up just yet, be sure to consider making the offer, locking in the rate as quickly as possible, then simply refinancing when the rates go down further. This will result in a decent rate and at a relatively competitive home purchase price with consideration to today's housing market madness.
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Terry Roberts is a U.S. Marine Corps Veteran and specializes in residential mortgages, including new construction, conventional, FHA, and VA home loans. He has helped more than 10,000 clients start the home buying process across America.
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