Feds Cut Rates

Get ready for housing to jump yet again... It amazes me that we have a so called "democracy" and the one item that is most important in everyones lives is not able to be changed by citizens or their representatives.

 

One of the problems with the current housing market liquidity is that there are a ton of people who won’t move because they’re locked into crazy low rates. The closer we get to those rates, the more liquid the market will become, and liquidity lowers prices. Whether it’s enough now to offset the increased purchasing power, we will see. But in this market it’s not a straight corollary.

 

Creating more movement from those locked will increase demand on top of increased purchasing power. I get why they did it because they are mostly bank CEOs, they want money moving in and out of their banks. That whole system is corrupt.

 

The one handed bad economic news typists are going to be so mad!!!

 

It is called the lock-in effect and it’s a well studied phenomena. 20 people bidding on 18 homes has less price pressure than 3 bidding on the only available house.

Working Paper 24-03: The Lock-In Effect of Rising Mortgage Rates | FEDERAL HOUSING FINANCE AGENCY

 

Very interesting. I find their estimate on probability of selling passes my smell test if I apply it to me.

"This paper finds that for every percentage point that market mortgage rates exceed the origination interest rate, the probability of sale is decreased by 18.1%. This mortgage rate lock-in led to a 57% reduction in home sales with fixed-rate mortgages in 2023Q4 and prevented 1.33 million sales between 2022Q2 and 2023Q4."

 

If today is any indication, mortgage rates edged up. The half-point cut signals to investors that the Fed will be aggressive in stimulating the economy which could easily fuel further inflation. I can't blame the market. The half-point cut only makes sense if we're entering a recession. Recall Powell only cut the rate a half point at the onset of Covid. It's not a small move.

 

Yeah today feels like a “buy the rumor, sell the news” market day. Markets were up almost 20 percent under the expectation it was coming, it was largely priced in.

 

Boooooooo! The fed cut the rate… boooooooo. Conservatives hate rate cuts under Biden.

 

LOL. Tommy T.

 

LOL ... Powell is a Trump appointee... and the Fed is *supposed to be* independent. Republicans need to get a grip.

 

Alabama should create their own instate higher interest rates to stick it to the Fed!

 

Worse than Herschel would have been?

 

"Good news for America is always bad news for MAGA".
Well said.

 

I won't know what to think of this until our master economist and resident alien checks in.