Buyer’s market may be on the comeback

Just a few short months ago, the 30-year fixed rate broke above 5 percent. Unemployment has been at a 50-year low, the U.S. consumer has been spending like there’s no tomorrow and wage inflation was at the top of the Fed range. All these were indications that mortgage rates were going to continue to march higher, possibly into the mid 5s.

Then came the government shutdown, the threat of 200 billion in tariffs on China, and a 10 percent correction in the market in December, and rates in January came back down to the mid 4s.

Mortgage rates play a huge factor when someone is buying a home. Yes, people must buy if they have an expanding family, don’t want to pay rent or have to move because of their job. But when rates get too high, buyers tend to pull back and sit on the sidelines.

Also applying downward pressure on rates is the fact that the Fed, who was scheduled to raise rates twice, has now said that they may only raise rates once, and depending on the data may not have to raise rates at all. This tell us that the U.S. economy may be softening and that rates may have further to fall this year and perhaps into 2020.

A softening economy means lower rates, which creates an optimal buyer’s market in which rates stay low and prices don’t go up as fast.

All this will depend on the Fed. They have a tough job. If they raise rates too much it could put the economy into recession. They need to be cautious and steady. Exercising patience could be there best attribute.

All in all, I believe that this is a great interest rate environment to buy a home in the spring of 2019 and for the rest of the year.

To contact me, call 773-557-1000 ext. 15, e-mail ron@ronmortgage.com or visit http://www.ronmortgage.com.