Portland Mortgage Market Update — September 20, 2024

IT FINALLY HAPPENED! The Fed cut rates by 50 basis points (a basis point, or bps is basically .1% of rate). The market was 50/50 of if the cut would be 25 or 50 bps, and some members of congress we calling for a 75 point cut. The bottom line is the Fed is comfortable with the inflation trend since it has already hit their benchmark goal for this year, and as the labor market has cooled but is still strong (depending on which report you are paying attention to), it is now appropriate to focus more stridently on the Fed dual mandate of labor market vs inflation. They have both cooled to a level where they are supporting each other at the Fed's preferred levels and this 50 bps cut is an effort to stay ahead and be proactive by the Fed.

SO THAT MEANS BETTER MORTGAGE RATES? No! Actually quite the opposite in the immediate term. The Fed cutting their interest rate is an effort to bolster and economy and an effort to avoid a potential recession. By bolstering the economy, stocks go nuts and the bond market takes a while to digest. So mortgage rates actually worsened on Wednesday, recovered on Thursday and are currently back in the red. In the long term, however, rates will continue their downward trajectory, so ultimately this is great news.

WHAT LIES IN THE FUTURE? With Wednesday's Fed meeting they also released their economic projections which is an anonymous survey of the Fed members where they show their guesses on where rates will be in the future (I picture them with their heads down on their desk with eyes closed and raising their hands like they are playing "heads up 7-up" in grade school, but I bet it is a bit more involved than that). In the economic projections, they released their dot plot which shows the Fed is anticipating 50bps more in rate cuts this year and another 100 bps in cuts through next year. So better times are on the horizon!