Been a while since I emailed you all, but since we had a fairly momentous occasion this week, I figured this was as good of a time as any to reconnect.
That momentous occasion was for the first time in a very long while, the Federal Reserve (The FED) lowered interest rates by 50 basis points. As with all economic news, there are a million interpretations of what this means.
Does it mean that inflation has been tamed? Does it signal a recession? Does it show a softening jobs market?
Here’s what I think: COVID was an acute health, social, political AND economic stress test on us all. None of us knew the script and we all muddled through that period of time doing our best. Interest rates are just a fancy way of saying “the cost of money”. Anything definition is more technical than that is outside the scope of this email. (But I invite you to inquire if you’d like to nerd out a bit)
The lower the interest rates, the cheaper it is to borrow money and vice versa. The FED yesterday made it cheaper for individuals and businesses to get their hands on cash. When that happens, people borrow money for homes, cars and their business.
During COVID, world economies were very concerned (rightfully so IMO) that the speed of money would grind to a halt. Therefore, extremely low rates were put in place to keep the economic engine going. Subsequently, the speed of money as we came out of COVID got out of hand and so then they were raised to slow things down.
If you want to look at it this way: Interest rates can be a powerful lever that central banks and governments can pull slow down or speed up an economy.
The Federal Reserve believes they have successfully cooled things down after several years of high rates and they are looking to settle back into a more normal interest rate environment.
Below are questions I’m getting since they cut rates at 2PM EST yesterday:
Q: Will go back to their COVID levels??
A: My answer is no. COVID was such an extreme event and if one is hoping for that scenario, they need to think about the predicament we’d find ourselves in if that were the case.
Q: Will they continue to come down?
A: Yes, the FED has indicated another large cut by the end of the year and then subsequent cuts in early 2025.
Q: Is the FED rate and mortgage rate the same thing?
A: No. However they correlate and can go up and down together. Generally, the lower the FED rate, the lower mortgage rates
Q: Is now a good time to refinance my home?
A: It’s getting there if you have a 7%+ rate. At the very least you should fill out an app with my mortgage company and then see where they head during the fall. I have about 8 past clients who’ve already done so. Even if you didn’t use me as your realtor, I can help.
Q: What happened to inflation? Is that still a thing?
A: All signs are that inflation has cooled considerably, BUT it will take some time for this reality to appear at the checkout line. It will be important to allow competition and capitalism to work here, but many sectors are already back down to pre-COVID levels and have been for some time. (e.g. the price of lumber and building materials)
I am happy to answer any other questions offline, but hope this helps demystify what all the hubbub is about!
Don’t forget, you can always #asksethanything
asksethanything.com 
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