Interest Rates Spike In February

For those who have been waiting for the fed to drop interest rates, you may be waiting longer than you anticipated. On Tuesday, February 13, the latest inflation report came out showing that inflation was still higher than expected. This followed very strong jobs report showing that way more jobs were created in January and December than expected or previously reported.

Many people don’t necessarily feel like the economy is doing well because prices for almost everything are much higher than they used to be and they’re not expected to go down. But the underlying fundamentals of how we usually grade an economy, such as unemployment and GDP growth, have been very strong. There's a very big disconnect from the statistics of the economy and labor market and how people actually feel in the real world, and that tends to be a political conversation we are not going to have. 

All that aside, the federal reserve makes their decisions based on the statistics of the economy and not the overall sentiment of the people living in it.

The last few months of jobs reports were revised upwards showing more people are employed than previously thought, and the most recent inflation report showed inflation year over year was 3.1% when the expectation was 2.9%. That may seem insignificant, but it was enough to send mortgage rates up about .25%. With more people employed, more people have money to spend which in theory continues to keep the economy heated up and leads to more inflation.

You can definitely make a good argument that inflation is way higher than 3.1% for a ton of things, and you would be correct. But I’m not trying to have a political conversation - these are just the government reported numbers by which the FED makes their decisions. Don't shoot the messenger!

Rates have increased back up into the low 7% range as of the middle of February. That’s down significantly from their highs of above 8% back in October 2023, but up from the 6.5% range we saw in January 2024.

With the statistics of the economy doing well and inflation still above where the Fed wants it, the expectations of the market are now that the FED won’t consider lowering rates until at least July now. That has been pushed back from March expectations earlier in the year.

So what does this mean for you if you’re a potential Buyer? You cannot time the market. The best time to buy a house is when you are ready to buy a house and can afford to do so. None of us can control the market, none of us can control interest rates, but the fact remains that prices for houses have not come down and are not expected to come down anytime soon. 

What does this mean if you’re a potential Seller? You need to be extra careful about selecting your list price. Rates starting with a 7 is a mental roadblock for a ton of buyers. Now that rates are back up above 7%, you’ll likely see fewer buyers in the next few weeks bidding on properties. Being priced accurately from the start is going to continue to be important in maximizing your sales price. Overpriced homes sit longer and receive fewer offers, while correctly priced homes - especially those that are fully updated - will continue to sell quickly, for top dollar, and likely with multiple offers!