Weekly Market Update: August 30th, 2024

Fed to Cut Rates in September

Join me in our ‘Weekly Market Update’ to decipher what to expect in the coming weeks & months.

Happy Friday! Brian Manning here with a weekly update. Let’s dive right in. I was out of the office last week on vacation visiting family, so I didn’t get a chance to provide a market update. A notable development from last week was the Federal Reserve’s annual meeting in Jackson Hole. During the meeting, Fed Chair Jerome Powell gave a speech that suggested a rate cut is likely to occur on September 18th. The key question now is whether the rate cut will be 0.25% or 0.50%. Based on current data, a 0.25% cut seems more probable, but the true indicator will be the upcoming employment data. If unemployment continues to rise or remains elevated at around 4.3%, a 0.50% cut could be on the table. Conversely, if unemployment decreases, a 0.25% cut is more likely.

This week, Monday and Tuesday were quiet news days. On Wednesday, a report revealed that interest rates are 1% lower than they were at this time last year, and refinance transactions have increased by 85% year-over-year. From our own experience, we’ve been able to help many clients with refinancing, so that 1% reduction is definitely making a difference. If you’re interested in learning about refinancing, give us a call.

On Thursday, we received data on pending home sales for July. I wasn’t surprised to see this number down, as it fell by 5.5% month-over-month and 8.5% year-over-year. Some have questioned why, despite lower interest rates, we haven’t seen a significant surge in the housing market. The reality is that it takes time for homebuyers to react to lower rates. The process involves initial discussions, viewings, pre-approvals, and more, which can delay the impact of rate changes on the housing market. While activity will increase over time, it doesn’t happen immediately.

Today, we saw the release of the Personal Consumption Expenditures (PCE) index, which is the Federal Reserve’s preferred gauge of inflation. For July, the PCE was down 0.16% month-over-month, aligning with the Fed’s target. The three-month run rate of inflation stands at 1.74%, suggesting we could hit the Fed’s 2% inflation target by early to mid-2025. With this, we can expect Federal Reserve rate cuts to begin in September, although challenges like persistent unemployment will continue. Inflation is expected to decrease, supporting the path toward lower interest rates that many have been anticipating.

I’m available all weekend if you have any questions or want to learn how we’re closing purchase transactions in just 10 days. Happy Labor Day weekend and have a great Friday!

-Brian

303-500-3839

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