This week the Fed met for the first time since Kevin Warsh was appointed as the Fed Chairman. In his first press conference after the meeting, he made some significant changes. His statement was short, only 4 paragraphs. The Fed voted to keep interest rates unchanged which was expected. He also committed to the 2% inflation target and said that the Fed will deliver. There was no forward guidance in the statement and it did drop the easing bias.
The markets reacted negatively to the Dot Plot Chart and the economic projections. As a whole, the Fed got more hawkish with half the members expecting at least one rate hike this year and 5 expecting none. Warsh didn’t participate in the dot plot chart signaling that he doesn’t believe in forward guidance and downplaying the importance of it. If the dot plot chart goes away, so does one of the biggest sources of volatility in the mortgage market.
Warsh wants to look at real time data, have less communication from the Fed and create task forces to improve and reshape the Fed. He wants to review the qualify of the data the Fed uses to make decisions. The jobs numbers get revised significantly weeks after the initial announcement, so looking at better data will help with the decisions the Fed makes.
The initial reaction to the Fed announcement was very negative with the bond market getting much worse on Wednesday afternoon. Many lenders repriced worse as the afternoon went on. Today the bond market has rallied, still down from yesterday’s best numbers but much better than where the day ended yesterday.
How does this affect interest rates and home prices? The reality is rates are still in the same range they were a over the past week. The expectation is when rates do come down, home prices will go up. More buyers will enter the market and that can cause even more multiple offers than we are seeing now. Feel free to reach out with questions! Both Sharlene and I are here to answer questions and help guide you in your home buying search!
Leslie Vanderwerf, NMLS ID#335509, CrossCountry Mortgage LLC, An Equal Housing Lender, NMLS#3029 – Email – Website
