Believe it or not, today is the first “night” of spring, as the Spring Equinox happens late this evening. This means that we are almost through the first quarter of the year. Spring is especially important not only because of the nice weather and the flowers, but also because it is prime real estate season. Going into the new year, there was much optimism about a real estate recovery in 2024 because mortgage rates had finally turned downward. However, this optimism did not necessarily turn into an early spring for real estate. What happened?
A late real estate spring is often caused by bad weather. If most of our cities are covered in snow, people tend to stay inside for the winter. And we have had some rough weather, especially in California. But much of the nation has experienced another mild winter. What we have experienced is considerably good economic news. The economy has been so strong that the markets have given up on a rate decrease by the Federal Reserve at their March meeting, which also starts today. In November, the markets were betting on a March decrease. Now bets are on a June move, which takes us to summer.
Regardless of the Fed’s decision tomorrow, everyone will be analyzing their announcement after the meeting for any glimpse of when the rate cuts will come. Keep in mind that we don’t need to wait for the Fed to lower short-term rates for mortgage rates to start falling. As soon as the markets start speculating that the Fed is going to act in the near future, the markets will move in anticipation of this activity. Which is exactly what happened during the last quarter of last year. There is another reason that the markets may be optimistic about the Fed lowering rates. As we get close to the election season, the Fed typically shuts off rate activity for fear of influencing the election. Thus, if they are going to lower rates, they can’t wait too long, or it will be next year before they can act.
