A majority of real estate professionals believe a rate cut by the Federal Reserve is critical to a sales recovery, according to Inman Intel Index surveys. But the timing of these cuts is unclear.
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Unanimity among real estate leaders is rare.
But according to January’s Inman Intel Index (Triple-I), real estate professionals are nearly unanimous on one thing: Multiple rate cuts by the Federal Reserve this year will be a key component of the housing market’s recovery.
more than 96% of brokerage and mortgage company leaders Who responded to Triple-I in January? There is consensus that the real estate rebound in 2024 will depend at least in part on multiple interest rate cuts by the Federal Reserve.
Among these leaders, 55% believes a “large part” of the recovery depends on these cuts, while another 14% said the recovery was “entirely” up to them.
Chart by Chris LeBarton
Well, it’s fair to say it’s been a rough few weeks for those Fed watchers. 60% Think consumers have not adapted or accepted it yet Mortgage interest rates range from 6% to 7%.
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While most still expect the Fed to reduce effective federal funds at least three times this year, the timing of those cuts has become less clear since Triple-I ended on January 31.
that’s why:
- On the same day, Comments from Fed Chairman Powell At the end of the committee’s January meeting optimism deflated The Fed will cut interest rates as soon as possible at its next meeting in March.
- Two days later, the Department of Labor issued another Jobs report unexpectedly strong The unemployment rate is 3.7%. The unemployment rate has remained below 4% for the longest stretch in more than 50 years.
- At 8:30 a.m. on February 12, hopes for a rate cut in March were almost dashed. At that time, January’s consumer price index data and headline and core indicators of inflation were released. Exceeded market expectations.
These developments do not guarantee that the Fed will be able to maintain the key interest rate, currently between 5.25% and 5.50%, when it adjusts interest rates. See you next month. But aside from clear communications from Powell and little data to change the situation, bullish Wall Street has also changed its tune.
CME Group’s Fed Watch ToolCompanies that track futures markets to predict the Fed’s moves showed a sharp decline in investor confidence in a rate cut in March. Last week, only 10.5% of investors expected the Fed to cut interest rates in March. That’s down from 39% after the January meeting and a fraction of the 88% on Dec. 29.
Agents and loan officers synchronized
Triple-I also provides monthly insights from agents and lenders, and similarities emerged in their views on the importance of interest rate cuts to their businesses.
- Two-thirds of mortgage lenders Ratings for March rate cut Importance 4 or 5, where 1 is defined as insignificant and 5 represents critical. The findings come against the backdrop of multiple mortgage company closures and consolidations that have intensified since the start of the year.
- The proportion of agents is only slightly lower: 60% Among them, they attributed the importance of the March rate cut to 4 or 5.
Mortgage rates rank second as the top business concern for agents and lenders.
Both groups still have “lack of housing inventoryAlthough there has been some recent momentum in the number of new homes listed for sale, they remain at the top of their respective lists. In a counterintuitive way, interest rates not falling—or even rising to some extent—would help resolve their shared predicament. When interest rates rise, fewer buyers qualify to purchase homes, causing inventory to increase.
So when will mortgage interest rates be lowered?
Since the Fed’s rate actions don’t directly affect mortgage rates, it’s helpful to keep looking at their magic ball.
But they do play a key role in influencing the market, and entering late February, all three rate cuts were fully discounted in the bond market. The fourth rate cut in December was priced at just above 60%.
Of equal, if not greater, concern to some market watchers is the prevailing spread between 10-year Treasury note and 30-year fixed mortgage rates. The spread – the average interest rate on a 30-year fixed mortgage minus the yield on the 10-year Treasury note – has fallen from a 20-year high of 2.9%. Historically, the gap between these two metrics has been close to 170 basis points.
As long as Treasury rates remain high, mortgage rates will remain high. But if yield spreads can compress again and the Fed begins a round of rate cuts, rates could still be closer to 6% by the end of 2024 rather than 7%.
The only thing everyone seems to know, though, is that it’s unlikely to happen next month.
Methodological Notes: Inman of the month Intel index poll Taking place from January 21 to 31, 2024.Invite the entire Inman reader community to participate, and Intel A total of 1,029 responses were received.Respondents to this poll were directed to the SurveyMonkey platform where they self-identified their profile in the residential real estate market. Respondents were limited to one response per device, but there was no limit on IP addresses. Once a profile is selected (residential real estate agent, mortgage broker/banker, business executive/investor/proptech or other), respondents answer a unique set of questions for that specific profile.because poll There is no requirement for age, gender or geographic location demographic information, and there is no data weighting.this poll Will be conducted monthly, with recurring questions and unique questions for each profile type.
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