re: Will the anticipated 3 rate cuts jump-start residential home sales this year?

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We need a slow drop in consumer spending, auto sales, home sales, etc.

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You don't think all of these have massively decreased in the past 3 years?

The coastal states need a cut, insurance is killing folks and pricing our regular homeowners and allowing this mega corporations to buy thousands of homes at a time using cash.

This isn't sustainable. How little spending do you want?

I'm not saying go to 2% but 4.5-5% makes it so much more bearable.

Also banks are building in points, believing that folks are going to refinance asap.

I don't want hyper inflation but I don't want to become a nation of renters owned by Blackrock.

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You don't think all of these have massively decreased in the past 3 years?

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How do you define massively decreased. I know many people love their fear porn on how bad things are, but it's really the opposite. The last three years things have been too good. We are only finally seeing some leveling off with inflation in the past 6 months.

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The coastal states need a cut, insurance is killing folks

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This is true. Rate cuts shouldn't be the solution to these problems though.

I may be hijacking my own thread, but this administration's policies are punitive for American citizens. For example, its energy policies significantly increase supply-side costs. They know it but don't care.

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Buyers are just sitting back and waiting for the rates to drop

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This doesn't make sense. Home sales are low because supply of homes for sale is low - not because there aren't enough buyers.

The only two things that will jump start residential home sales are: (1) ending the residential mortgage foreclosure moratorium that is still in effect until Nov. 2024 because it will add needed inventory back into the supply chain and (2) higher consumer confidence.

All I am saying is that in my line of work and personal finances, rate cuts are needed now.

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Will the anticipated 3 rate cuts jump-start residential home sales this year?

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Home sales have already been increasing.

New home sales have been on the rise since November.

Existing home sales have been increasing since December.

Median sale price essentially stalled in 2023. That's a quarterly read, so if the numbers of sales of new and existing homes are rising, it's a safe bet that median sales price for Q1 is going to be "coming in hotter than expected" (which is what they've said about CPI multiple times already this year).

There seems to be an assimilation effect taking place where consumers are getting used to the current interest rates as being the new norm so they are returning to house-shopping. If this is a solid read, then even a single cut to rates right now would cause sales (and then prices) to skyrocket.

Rates aren't cut because an economy is doing well, they are cut because an economy is starting to do poorly (whether just a slowdown in GDP or a massive recession).

Inflation is starting to creep back up (both CPI and PPI). If CPI were measured correctly (like no more OER and weighting the basket of goods on propensity of being purchased), it would likely be closer to 4% right now than 3%.

Job creation is still (allegedly) strong and while Unemployment has moved up slightly, both Initial and Continued Unemployment Claims continue to remain flat.

All of that equates to there not only being no reason to cut rates right now, but that cutting rates would push inflation back up.

It's a safe bet that rates will remain paused until at least June (right now, my thinking is September, but there's still a lot of time between now and then). This means that, at best, three cuts would have be crammed within six months. Making 3 cuts of any amount in 6 months means your economy is struggling.

That said, there will likely not be three cuts this year. It will take an economic miracle or a lot of lying just to get one cut before the end of the year.

With inflation moving back up, we need at least another hike (we should have had one at the end of last year, but JPow finally blinked in his staredown with Wall Street).

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If anything rates should go higher

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That won't be necessary. The economy would be beyond screwed if they didn't have AI in the pipeline, but we are finally starting to see that trickling through and this will be an even bigger boon to productitvity than the Internet was in the early 2000s.

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Some on Wall Street think the developments in labor productivity could help the stock market survive stickier-than-expected inflation that has emerged as a concern in recent weeks.

"If productivity goes higher, then [companies] are able to cut costs, improve margins, things like that," Bank of America US and Canada equity strategist Ohsung Kwon told Yahoo Finance. "That's why companies are so focused on improving productivity. There's a lot of macro headwinds happening. So they are trying to find ways to improve productivity and sort of offset those headwinds."

...The research team at Carson Group argues an increase in productivity could offset these concerns, though.

"With productivity soaring like it is and will hopefully continue like it can, you don't have to worry about inflation coming back, you really don't," Carson Group chief market strategist Ryan Detrick told Yahoo Finance.

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LINK

Whoever is the next president will get to take credit for fixing inflation, but the real MVP is Sam Altman for pushing out ChatGPT when he did and Microsoft for jumping on it and cranking up an AI arms race.

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Maybe I'm just an economic dumbass, but it seems like, in modern market history, mortgage rates and home prices seem to roughly balance each other out, when it comes to total monthly payment.

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They typically have an inverse relationship yes, but the question is will home prices decrease enough to offset the higher interest rate?

For this last rate hike the answer to that was a resounding no. House prices didn't move much.