Fed Funds Rate: “Dot Plot Mania”

·         Mortgage Rates¹ – It has been a good week for rates!  We started off with the November Consumer Price Index (CPI) report that showed year-over-year inflation declining from 3.2% to 3.1%.  The Core rate, which strips out food and energy prices, remained at 4% year over year.  The best news of the week came at Wednesday’s Fed meeting, where the Fed pivoted off of the “higher for longer” theme, changing their tone and signaling the potential for rate cuts next year via their quarterly “Dot Plot” projection.  Powell outright said that the Fed will not be waiting for inflation to reach its target before cutting and would do so in advance to account for lags.  The bond market rallied on this news and our benchmark rate took a nice dip down to 6.375% (6.422% APR).

·         Weekly Market Data² – We saw another drop in active listings and are at 6,030, with only 546 new listings hitting the market.  This is typical as we near Christmas and the end of the year.  It was also a slow week of closings, with only 554 buyers and sellers signing on the dotted line.  Median Days on Market continues to grow, coming in at 27 days.  Overall, only 25% of homes have been on the market for 30 days or less.  (Source REColorado, all DMAR counties, this past week – Thursday to Wednesday).

·         Columbine Team Insight – We have seen buyer activity pick up due to the lower interest rates and while we had only 67% of offers accepted, this was in part due to lower offers.  Of the offers accepted, they averaged 2% below list price.  We anticipate that with the drop in rates and a new year around the corner, those buyers who have been waiting on the sidelines will begin to jump back into the market.  We continue to believe that it is better to be ahead of this impending wave – allowing buyers to evaluate their options while the competition is still relatively light.

·         Market Trends – For the first time in over 2 years, the Fed is no longer projecting higher interest rates over the next 12 months, and that is significant!  Holding steady and anticipating multiple rate cuts next year, a lower Fed funds rate will have a more direct impact on short term financing (HELOCs, auto loans and credit cards).  While the impact on long-term financing rates, such as mortgage rates, is only indirect, the tone of the Fed’s comments do influence the mortgage market.  It is never a straight path forward, and individual economic reports (as well as world events) will impact how far and how fast they drop.  As we shift from a rising-rate to a declining-rate environment, we want to help our clients stay close to the market so that if/when the opportunity to refinance presents itself, we are positioned to act quickly.  Setting a clear Target Rate ahead of time (with our clients’ input) and actively monitoring the markets, our Refinance Watch List gives our clients the chance to consider their options more deliberately – allowing them to act on opportunities in what can be a very dynamic market.  We know you won’t be able to time your purchase with the bottom of the market, but we can try and get you as close as possible after you close.

NOTES:

(1)     The mortgage loan scenario presented assumes the purchase of a primary residence, excellent credit, an 80% loan-to-value (LTV), a loan amount of $480,000, a 30-year fixed interest rate of 6.375%, and a P&I payment of $2,994.  The Annual Percentage Rate (APR) is 6.422%, which reflects a lender credit of 0.128% ($614).  Monthly principal and interest payments, which will continue for the stated term until paid in full, do not include mortgage insurance, property taxes or homeowners’ insurance premiums and actual monthly payments may be higher.  Interest rates are current as of 12/14/2023 and are subject to change at any time without notice.  All loans are subject to credit approval.  Other terms and conditions may apply.  Not all loans or products are available in all states.  Regulated by the Colorado Department of Regulatory Agencies, Division of Real Estate.

(2)     Source: REColorado®, Inc for the period 12/07/2023 to 12/13/2023.   Data for Adams, Arapahoe, Boulder, Broomfield, Clear Creek, Denver, Douglas, Elbert, Gilpin, Jefferson, and Park counties. This representation is based in whole or in part on content supplied by REColorado®, Inc. and REColorado®, Inc. does not guarantee nor is it in any way responsible for its accuracy. Content maintained by REColorado®, Inc. may not reflect all real estate activity in the market.