Well, it ain’t bad, that’s for sure! The Raleigh real estate market is holding it’s own, regardless of a slowdown in relocation buyers. Anything that can help people relocating to Raleigh sell their homes in other markets is a good thing for us. But, I wonder just how much this will really change anything?
The impact on mortgage interest rates is yet to be determined, but at the very least the move by the Federal Reserve to cut short term rates by a quarter point takes away any upward pressure that may have existed. There is no question that this move by the Fed is aimed directly as shoring up the shaky national housing market.
There is, however, another interesting piece of data that was released yesterday. The Commerce Department reported that the national gross domestic product (GDP) was up 3.9% for the quarter. Hmmm, have we ever had a cut in short term rates with such a healthy expansion in output? My guess is that even though the GDP number was really good, the Fed is more concerned that the declining housing market is significant enough to douse any inflationary flames that may get sparked in other parts of the economy.
So what does the rate cut mean locally? Not much really changes. Mortgage rates might track down a little. We’ll have to wait and see. Just last week a client got a 5.875% rate on a 30 year fixed mortgage. Nothing wrong with that!
Like I said at the beginning of this article, the best thing that could happen for us locally is for the situation to improve nationally. Although local showings and sales are down a bit right now, if the relocation buyer were to come back we would likely be right where we should be.
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I’d like to add a little to this posting.
The Fed cut rates by a quarter point, taking the Fed Funds Rate target down to 4.50%. As we have seen in the past, the reaction by the inflation hating Bond market wasn’t very favorable. Why? When money flows into the stock market (as it did after this announcement) bonds and mortgage backed securities suffer by money flowing out of that particular investment vehicle. Rates can rise as a result. Keep in mind that bonds HATE inflation.
The Fed stated “Readings on core inflation have improved modestly this year, but recent increases in energy and commodity prices, among other factors, may put renewed upward pressure on inflation. In this context, the Committee judges that some inflation risks remain, and it will continue to monitor inflation developments carefully”. The Fed’s concern about rising energy and commodity prices and their potential for fueling inflation weighed on the Bond market. Additionally, the Fed left the markets with the impression that there will be no further rate cuts for the remainder of this year.
Speaking of inflation, the Fed has to feel good about this morning’s read on consumer inflation, as it remains in check for the time being. The Feds favored inflation gauge, the Core Personal Consumption Expenditure Index (PCE) for October rose 0.2%, which was in line with expectations. This left the year-over-year Core PCE unchanged at 1.8%, which remains within the Fed’s target zone of 1 -2%. This is good news to the inflation fighting Fed, especially after they had already cut a half point in September.
Personal Income and Spending for September were both reported essentially in line with expectations. The Personal Savings Rate was reported at 0.9%, which is a slight improvement from the prior month’s reading. Overall, the report shows consumer spending remains strong, core consumer inflation is holding steady and people are saving a little more of their after tax dollars.