All bets are off…or is it just that NEW bets are being made?
…with the silver lining of lower rates, ARE new bets actually being made?
…or are we just seeing another pause, due to uncertainty?
Like Michael Corleone said, “Just when we thought we were out, they pulls us back in.” It’s like Groundhog day; every time we start to see the light and the prospects of substantial market activity, we encounter a speed bump…or land mine. And this time, it’s in the form of global tariffs. The biggest hurdle for the last three years has been elevated mortgage rates brought on by inflation.
The good news was that the Fed’s goal was to bring them down in a measured manner, which they were achieving, albeit slower than hoped for. Now with “Liberation Day”, rate declines have accelerated, but for all the wrong reasons. They are now declining because the global economy is in shock and investors are seeking safer places to put their money, like 10 year U.S. Treasury Bills. When that happens and the price of these treasury bills goes up, rates come down.
30 Year Jumbo Mortgage
This dynamic presents an interesting moment. Interest rates, the one metric that had been holding back…for both buyers and sellers, is loosening up; this presents a more favorable buying opportunity at the moment. It must be noted, there is an opposing dynamic which will mature into our equation in the coming months which could erase this positive step and instead send rates in the opposite direction once again.
The reason this might happen would be IF inflation intensifies again. The extreme nature of these tariffs has many economist predicting substantial inflation and, everyone knows, the Fed does not drop rates in the face of inflation. If that inflation becomes equally extreme, it could prompt the Fed to actually raise rates. Then what?…we could be back into the same cycle and it could happen in the midst of a recession this time.
These factors, as always, will affect the buying pool differently. The wealthy will…well…do what the wealthy does, and take advantage of every possible buying opportunity. That said, this financial event has even caught them off guard, leaving most (of these all-cash buyers) with less liquidity than before. The “proletariat”, for lack of a better term, may actually find their buying opportunity now, in this window of low rates. These people are far less affected by stock market plunges and may see things loosen up for them until…well…rates go up again (if they do). It’s hard to predict, but with rates possibly around the best we will see for a while, it’s likely worth exploring the actual opportunities.
Question: 1) Will the U.S.’s rigid policy regarding these tariffs prove hubris and in turn hurt us in the global economy, as countries lose trust in us and seek out other reliable alliances? or 2) Will it prove to be successful? If so, when will we know? Let me know your thoughts.
I always say: 1) Anyone interested in buying or selling, should be rolling up their sleeves to determine whether the time is right to sell or if there’s a home/investment property out there for them; and 2) Who represents you matters…your best investment is often in the broker you choose; find someone with experience, who you feel you can trust.
