Interest rates are on the minds of many Americans as we enter a new year. Anyone who owns property, has a mortgage, or has taken out a loan of any kind in the past few years has heard all about increased interest rates. The question on the minds of many Americans is “when will we see these rates drop?” The good news for those people is 2024 is shaping up to be the year you start to get some relief on that front. Here’s what you need to know:
Understanding Interest Rates
When you hear that the Federal Reserve has raised or lowered interest rates, that refers to the reserves banks lend to each other on an overnight basis. When that rate increases or decreases, there’s a cascading effect on the rest of the economy, especially on mortgage rates. Increased interest rates, which we have seen in recent years, will mean higher mortgage interest rates as well.
Recent Rate Hikes
The Federal Reserve raised the interest rate 11 times between spring 2022 and fall 2023, all the way from 0% to 5.5%. This was intended to fight inflation, which had begun to wreak havoc after the COVID-19 pandemic. With the inflation rate slowing and the economy stable, there haven’t been any rate hikes since September.
What Happens Next?
The consensus among experts seems to be not only that we’re past the stage of interest rate hikes, but that the Federal Reserve will be lowering rates through the year. In fact, the agency released it summary of economic projections in December, indicating therein that it will likely cut interest rates three times this year by a quarter percent each time. A late 2023 stock market surge would indicate investors also see interest rate cuts as likely. The Chicago Market Exchange’s FedWatch Tool believes there’s a 90% chance of a rate cut no later than May of this year and projects six cuts total.
What Will This Mean?
If the Federal Reserve does cut interest rates multiple times, we will likely see a requisite decline in mortgage rates. This will likely mean the prices of homes and certain commercial buildings will also rise as lower interest rates will allow more people to enter the buying pool.
Behind the Curtain?
Atlas Valuation is on the side that this is NOT necessarily good news of interest rates cuts. “Reading between the line” the Federal Reserve Chairman – Jerome Powell, expects three rate cuts this year. However, this is confirming that the Federal Reserve is FULLY EXPECTING A RECESSION DURING 2024 AND THEY ARE PREPARING TO ATTEMPT TO STIMUATE THE ECONOMY. So, the Federal Reserve will likely attempt to stimulate the economy by adding liquidity, aka bank lending, to the markets and consumers. How this will prevail for the future is unknown. However, the Federal Reserve has avoided two depressions in 2008/2009 and 2020 by lowering interest rates.
If you’re wondering how the value of your home or commercial space has been affected by interest rates, the experts at Atlas Valuation can help you find out. We offer professional appraisals of commercial and residential properties. Call 334-737-6993 today to learn more about what we can do for you!
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