A simplified definition of inflation is too much money chasing too few goods causing an unbalanced state where demand is greater than supply. To restore marketplace equilibrium, supply either must increase enough to equal said demand or prices must rise to decrease demand. For the past two years, the Fed has utilized the monetary policy tool known as Quantitative Tightening to combat inflation and restore overall market equilibrium by decreasing demand. In this case, rates have been raised which increases the cost of financed purchases and depending on a multitude of factors can take a considerable amount of time to matriculate through a large economy.
The major economic report released this week was May retail sales figures on Tuesday, which were below forecasts for a second consecutive month, reducing the pressure on rates. This decline in consumer spending will take several more readings to be deemed significant, and though our central bank has other factors to weigh before being able to make the first rate cut it is a sign that the Fed’s policies are beginning to work. Strong global service sector data released later in the week offset the improvement caused by the retail sales report and rates for most programs ended the same as last week.
How does this relate to housing??
When there are too many buyers and not enough inventory, prices rise. Until there is an equal part inventory to demand, prices will continue to rise, even as interest rates fall. The outlook on the housing market is that it could be 2030 before we are at an inventory level above demand, thus keeping house prices higher
If you are in the market to buy, do it sooner than later to be able to benefit from the expected appreciation it will gain over the next 6 years!
For more info reach out to Mac Church at mchurch@acmllc.com
Mac Church is a National Top Producer and 6 time Best of the Burg Winner as Best Mortgage Lender
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