AravindKCRealtor – It’s Complicated, But Also Simple

Depending on the company you keep over this Labor Day weekend, you might hear that rates are high, housing in the verge of collapse, and the economy is headed for a hard, recessionary landing. Or you might hear that rates are coming down, housing has turned a corner, and the economy remains surprisingly resilient. No one is wrong, yet, and it’ll be a while before we find out who’s right.

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AravindKCRealtor – Markets Were Anxious Over Powell, But Next Week Deserves More Attention

As the week began, the bond market continued heading toward higher rates at the same pace seen in the previous week.  This made for the highest mortgage rates in more than 2 decades on both Monday and Tuesday (albeit not much higher than those seen in late 2022).  Things calmed down on Wednesday as multiple European countries logged slower economic growth in a closely watched series of data.  The US version of the same data was also weaker than expected, thus helping rates have their best day in several weeks and one of the best days in several months.

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In general, weaker economic data coincides with falling rates.  This is econ 101, but it’s also a concept that the Fed has been driving home increasingly in the current environment.  Rather than worry about weaker data, the Fed sees stronger data as a bigger risk. The economy has been more resilient than expected in the face of significantly higher rates, and the Fed has been clear in saying that it has little incentive to cut rates until the data suggests a bigger negative impact.

Additionally, while many on the Fed have mentioned the possibility that rate hikes are done for now, just as many have expressed uncertainty as to whether additional hikes would be needed.  The key determining factor would be inflation, but the Fed’s concern is that economic strength could translate to unexpected resilience in inflation.

The market was looking forward (perhaps a bit too forward) to getting some greater clarity on these and other topics from Fed Chair Powell at Friday’s annual Jackson Hole Symposium.

Hosted by the Kansas City Federal Reserve Bank, Jackson Hole draws central bankers and economists from around the world and has occasionally served as a venue that offers a sneak peek at potential shifts in policy or the economy itself.

More frequently, Jackson Hole is notable only for its great expectations and underwhelming reality.  This year’s example mostly falls into this category.

Powell was slated for the opening remarks.  Market watchers were waiting for him to say something about the “neutral rate of return” (also R* or “R-Star”)–a hypothetical policy rate resulting in stable economic growth and stable, on-target inflation.  The recent obsession over R-Star is due to the fear that the low baseline for interest rates has moved up permanently for a variety of reasons that can’t possibly be determined or calculated any time soon.

As such, it wasn’t too surprising to hear Powell say “we cannot identify with certainty the neutral rate of interest, and thus there is always uncertainty about the precise level of monetary policy restraint.”  Translation: he has no idea if R-Star is changing or will change.

The other even crazier anticipation surrounded the Fed’s 2% inflation target with some market watchers wondering if the Fed was considering increasing the target due to the same sort of underlying structural issues that would underpin a higher R-star.  Powell was even more clear on that topic: “Two percent is and will remain our inflation target.”

In addition, the Fed Chair was extremely consistent with the press conference from July with respect to the delicate dance of fighting inflation without crippling the economy.  On both occasions, by his own admission, they are flying blind to some extent. In his words, the Fed is “navigating by the stars under cloudy skies,” and that “we will proceed carefully as we decide whether to tighten further or, instead, to hold the policy rate constant and await further data.”

The market was apparently hoping for something a bit more rate-friendly.  The reaction largely consisted of the futures market shifting bets on the level of the Fed Funds Rate at various points in the future.  It’s not so much that traders thought Powell was saying the Fed was more inclined to hike, but instead, simply less inclined to cut as quickly.  In other words, markets were pricing in almost 2 rate cuts of 0.25% in by the middle of next year, but after this week, it’s closer to only 1 rate cut.

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All of the above kept some pressure on longer term bonds on Friday morning, resulting in the average mortgage lender offering higher rates out of the gate.  As the day progressed and bonds stabilized, several lenders offered mid-day improvements.  The net effect was slightly higher rates for the average lender, but not as high as those seen at the beginning of the week.

When it comes to events that inspire volatility, next week is a higher probability than Jackson Hole.  There are multiple economic reports with strong, recent track records of influencing the bond market and, thus, interest rates.  Starting on Tuesday, there is an important report every single day of the week.  Several days have more than one, and Friday will bring the release of the jobs report for August–arguably the most important report of any given month.

AravindKCRealtor – How Multi-Decade Highs Are Changing The Way Mortgage Rates Are Quoted

At this point “high rates” are old news. We were already close to hitting the highest levels in more than 20 years last week, so it wasn’t a huge surprise to achieve that dubious distinction this Thursday. Some sources see the record-breaking rate at 7.09% for a 30yr fixed while others are over 7.5%. Both are accurate and we’ll explain why.

To understand why, we first need to remember that a mortgage rate quote is not as simple as the rate itself.  The rate that almost everyone refers to (officially the “note rate”) is only part of the equation.  While the note rate dictates the amount of interest paid with each mortgage payment, it doesn’t account for all the interest the average borrower pays.

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AravindKCRealtor – Mortgage Rates and Housing Didn’t Care About This Week’s Fed Rate Hike

It’s no mystery that the housing and mortgage markets are facing their fair share of headwinds in 2023, but some blow harder than others.  One of the most complicated headwinds is that of Federal Reserve.

At first glance, the Fed’s decisions to hike or cut rates are extremely important.  In addition to being prominent in the news, few other financial topics are as likely to make it into everyday conversation as the latest Fed rate change.

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AravindKCRealtor – To Sell/Buy house as per your expectations

If you are looking to sell/buy a house reach a real estate professional AravindKCRealtor.

Aravind(AravindKCRealtor) is a highly skilled and knowledgeable real estate agent specializing in the vibrant market of Overland Park, Kansas. With licenses in both Kansas and Missouri. Aravind offers comprehensive services for clients seeking residential and commercial properties. His dedication, expertise, and commitment to exceptional customer service have made him a trusted advisor in the industry.

Aravind can help you in identifying a property as per your criteria and VASTHU.

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AravindKCRealtor – OPEN HOUSE 8JUL 2PM-5PM

14161 BOND Street, Overland Park, KS 66221

4bed 4.5 bath 3 car garage well maintained house coming on July 6th Open House on Saturday July 8th.

Welcome to an updated and MOVE-IN ready 2 story OPEN FLOOR PLAN house with ample natural light. Located in the sought after HARMONY school in blue valley school district this house is a GEM!!

Link to full details.

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AravindKCRealtor – Two OPEN House’s 24th Saturday 10-12PM & 1-3PM

1.Open House 24th 10-12PM
14121 W 138th Terrace, Olathe, KS 66062
North facing – 2002 year built 4bed 4.2bath 3 car tandem garage. All main floor is hardwood with updated kitchen. Granite counter tops, gas cooking stove, backsplash and walk-pantry. Master bedroom with master bath, Kids bedroom with jack-in-jill and guest bedroom with its own private bath.

 

2. OPEN House 24th 1-3PM
17800 Hayes Street, Overland Park, KS 66013
MOVE-IN-READY East Facing – 2022 Year built 4 bed 4bath 3 car garage. All main floor is hardwood with living room high ceiling. Guest bed with full bath on the main floor and master bed 2 kids bedroom on 2nd floor with private baths and all walk-in closets. Level backyard with iron fence. Close to 69 freeway opposite Arboretum Park walkable to Wolf Springs elementary school. Bluevalley School District

AravindKCRealtor – Open House Jun24 10AM-12PM – North facing 4b3.2ba 3 Car Tandem Garage

This move-in ready home offers with 4 bedrooms, 3 full baths, 2 half baths, and a 3-car tandem garage, it provides ample space for a growing family. The main floor features beautiful hardwood flooring throughout, with a spacious living room that seamlessly opens to the kitchen, granite countertops, a stylish backsplash, white cabinets, stainless steel appliances, gas cooking with vent and a convenient walk-in pantry. All 4 bedrooms are located on the second level, master bedroom with a master bath, two bedrooms with a shared Jack-n-Jill bath, and a guest bedroom with its own private bath. The main floor also boasts a powder bath, while the basement offers a half bath, a wet bar, and plenty of space for entertaining. Outside, the level backyard is ideal for spending quality time with family, featuring a fence and a concrete patio. This home is truly a wonderful opportunity to settle into a comfortable and well-appointed space.

AravindKCRealtor – OPEN house 24th 1PM – EAST facing 4b4ba 2906 sqft 2022

Welcome to this MOVE-IN READY New Construction EAST facing 4 Bedroom 4 Bath 3 Car Garage house with a Double Door entry all side STUCCO located on Lot 123 in Arbor View with walking distance to the Wolf Springs Elementary school and easy access to the 69 freeway. The entry welcomes you with elegant 8′ double doors, leading to a two-story layout featuring a living room charming with high ceilings box type that seamlessly opens to the kitchen and breakfast area. The main floor is with a bedroom and a full bath, while the 2nd level boasts a luxurious master suite with a free-standing tub in the master bath, along with 2 additional bedrooms, each with their own private baths and walk-in closets. Outside, the iron fence encloses the backyard, which offers an inground sprinkler system and energy-efficient low-E glass windows. The kitchen showcases a furniture-style island with a quartz top and a stainless steel appliance package. The home is further enhanced by a spacious covered patio with a fireplace and an extended concrete space, providing ample room for summertime enjoyment. Don’t miss this exceptional opportunity to own a beautifully designed and ready-to-move-in home that combines comfort, style, and convenience.

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AravindKCRealtor – Rates Seen Staying Higher For Longer. Blame Canada?

In a surprising turn of events, this week’s biggest market mover for interest rates was a policy announcement by the Bank of Canada (BOC). The event was credited for prompting a re-think of the US Federal Reserve’s rate outlook.

Specifically, the BOC hiked rates despite about half the market believing it would hold steady.  While the odds that the Fed holds steady at next Wednesday’s announcement are quite a bit better, the argument this week was that central banks might err on the side of tough love as opposed trusting that inflation would subside.

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AravindKCRealtor – What Debt Ceiling? And Who’s Lying About The Jobs Report?

After dominating the news cycle for weeks, the debt ceiling issue is suddenly resolved and the bond market doesn’t seem to care. The jobs report proved to be far more relevant, but with half of it indicating a much stronger labor market and the other half saying the opposite, who’s telling the truth and why did rates only pay attention to the bad (good) news?
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AravindKCRealtor – Do Rates Care About Debt Ceiling?

It was nearly impossible to avoid news regarding the debt ceiling this week, but how much does it actually matter?

Let’s make sure we’re on the same page first.  What follows are a few NON-POLITICAL thoughts on the debt ceiling, which is different than a “default.”

The debt ceiling has to be increased periodically in order for the US government to borrow enough money to fund day to day operations.  There’s theoretically a point at which the government doesn’t have enough money to make payments that it had already agreed to make in the past.  That money can come from the issuance of Treasury debt (i.e. borrowing) or from sources of revenue (such as taxes).

ArvindKCRealtor

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