The NAR Lawsuit, Inflation (CPI), and Interest Rates! 🏡
Hi everyone, I’m Mercedes The Military Realtor. 🏡🪖
The lawsuit involving the National Association of Realtors (NAR) is about to finish, and there are a couple of important things we should chat about. Let’s break it down into two easy-to-understand parts:
How Real Estate Agents Get Paid
In places like Colorado and other states, there’s no rule that says how much money real estate agents should make from helping people buy or sell houses. Instead, the person selling the house and the person buying the house can talk to their agents to decide how much they think is fair to pay them. This means everyone can agree on a payment that makes sense for them, and there’s no set amount that everyone has to follow.
What This Means for House Prices and Being Able to Afford a Home
Some folks are wondering if the end of this lawsuit will make houses cheaper. The short answer is no. House prices depend on how many people want to buy houses and how many houses are available. Since there aren’t enough houses for everyone who wants one, prices aren’t likely to drop just because of the lawsuit. However, the total cost of buying a house might change a bit, especially if you choose to work with an agent who doesn’t charge as much, but remember, you might get what you pay for.
When we talk about being able to afford things, it’s not just about house prices. It’s also important to think about how much money people make. Sometimes, even when companies are making more money, they don’t always pay their workers more. So, if it’s getting harder to afford things, it’s worth talking about why people aren’t getting paid more, especially when the cost of living goes up.
So, even though the lawsuit is almost over, house prices will stay about the same, but how much you pay your agent can change.
Now, let’s talk about inflation & CPI which greatly affects interests rates
1. Inflation Trends
- February’s Report: Inflation rose to 3.2% in February from 3.1% in January, signaling an acceleration contrary to the Federal Reserve’s target of reducing inflation to 2%.
- Core Inflation: Slight improvement was noted in core inflation, moving from 3.9% to 3.8%, yet it remains significantly above the 2% target.
2. Federal Reserve’s Interest Rate Strategy
- The Federal Reserve had anticipated three interest rate cuts within the year; however, recent inflation data suggest these cuts are unlikely to commence soon. The probability of a cut at the March 20th meeting is virtually nil, with a 99% chance rates will remain unchanged, as per the CME FedWatch tool.
3. Reliability of Predictive Tools
- The credibility of tools like the CME FedWatch has been questioned, especially for predictions extending beyond the immediate next meeting. For example, January predictions for a March rate cut drastically fell from a 76% likelihood to just 1% following recent inflation reports.
4. CPI Report Details
- Energy: Year-over-year energy prices decreased by 1.9%, showing a reduction in energy costs but an increase from January’s 4.6% decrease.
- Food: Food prices rose 2.2% year-over-year, suggesting prices are still increasing but at a slower pace.
- Shelter: Shelter costs are up 5.7% year-over-year, still high despite improvements.
- Services: Services inflation remains a significant issue at 5.2%, with little change observed, indicating persistent wage inflation pressures.
5. Economic Implications and Federal Reserve’s Challenges
- The Federal Reserve faces a conundrum: stimulate the economy through interest rate cuts amidst an already booming economy or manage inflation that’s above target. This balancing act is complicated by upcoming elections and market expectations for rate cuts. With strong labor market figures and persistent inflation, especially in services, the Fed’s policy decisions will be critical in the coming months.
Overall, the Federal Reserve’s path forward is fraught with challenges as it seeks to manage inflation without stifling economic growth. The CPI report underscores the delicate balance between fostering a robust labor market and controlling price levels, a task made more urgent in the context of political and economic expectations.