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How Will Recent Federal Reserve Policy Changes Affect Housing?

Market Talk

Hello everyone. As we edge closer to 2024, it's time to reflect on shifts in the economic landscape, particularly having to do with lending. Recently, policy changes by the Federal Reserve to lower rates in 2024 made big headlines. Today, we will discuss the implications of the Fed's decision to pause rate hikes. As well as their plans for FUTURE RATE REDUCTIONS. Additionally, we will be going over fresh data for our local market in 'The Valley'. Important stuff, indeed.

The Federal Reserve's Recent Policy Shift

The Federal Reserve's latest announcement signifies a CRUCIAL TURN in their approach to managing the economy. Finally.

  • Stopped Hiking Rates: A marked departure from the trends of the past year and a half.
  • Rate Cuts: An anticipated three cuts in 2024, possibly four in 2025.
  • Inflation Trends: A noticeable deceleration in inflation rates.
  • Policy Pivot: Transitioning from rate hikes to rate cuts.
  • Housing Market Impact: Examining the effects on Greater Phoenix real estate.

This shift signals a more optimistic economic outlook. The Fed now deems the positive changes sufficient to consider reducing rates. This is expected to influence the market. Significantly. Especially in growing states like Arizona.

Also Read:1% Down Payment Programs See Popularity Growth In Arizona

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It Will Take Time To See How New Fed Policy Affects Housing

Greater Phoenix's Market & Interest Rates

The housing market in Greater Phoenix is under SCRUTINY following these monetary policy changes.

  • Fed Funds Rate vs. Mortgage Rates: Mortgage rates are affected by the Fed funds rate, but not directly set.
  • Lender Calculations: Rates are set based on future inflation and interest rate predictions.
  • Mortgage Rate Movement: A recent decline to 6.64%, the lowest since earlier this year.
  • Buyer Affordability Impact: Lower rates mean improved affordability.
  • Demand Increase Speculations: Predictions of heightened demand with rate decreases.

It's critical to recognize that while the federal funds rate impacts mortgage rates, it isn't the sole determinant. Lenders weigh VARIOUS ELEMENTS. Factors include inflation expectations and the mortgage-backed securities market.

Analyzing Supply & Demand

Understanding the supply and demand in Greater Phoenix's real estate is paramount to making SOUND decisions.

  • Cromford Market Index Insights: Indicates a balanced market as of late 2023.
  • Latest CMI: As of 12/19/23, the CMI was 104.2. Anything above 110 is a seller's market.
  • Supply Index & Demand Index: As of 12/18/23 - Supply Index was 65.6 & Demand Index was 68.3
  • Demand Plateau: No further decline in the demand index. Good news.
  • Supply Equilibrium: Supply index showing signs of stabilization.
  • City-Specific Variances: Differences in market conditions across Greater Phoenix.

The Cromford Market Index (CMI) is an insightful tool for gauging MARKET HEALTH. As of 12/19/2023, it shows a balanced market, with no significant shifts in demand or supply. We consistently update our website as the CMI changes. It is worth noting, this is the closest we have seen the supply and demand index. Over the past year or so, the supply index was MUCH LOWER. Hence, demand overpowered supply by a larger margin.

Also Read:Two New Bills That Would Dramatically Alter The Housing Market

A modern high-end home in the desert.

Greater Phoenix's Market Is Balanced Across 3 Main Categories

Will Lower Rates Revitalize The Market?

As 2023 draws to a close, understanding thePOSSIBLEfuture of the Greater Phoenix housing market is essential.

  • Seasonal Influence: The current quiet could be due to the holiday season.
  • Rates vs. Prices Debate: Whether rate reductions or price drops are more crucial.
  • Market Awakening Possibility: January might bring a surge in market activities.

The recent Federal Reserve policy changes and their potential impact on Greater Phoenix raise several questions. While lower rates may boost demand, other factors like SEASONAL TRENDS and PRICING STRATEGIES could play significant roles. Especially over the first quarter of 2024. Only time will tell. Rest assured, we'll be talking about here on LUXE BLOG.

Williams Luxury Homes

Part digital, a WHOLE bunch human, Williams Luxury Homes is a boutique brokerage in Scottsdale. In WLH, you have an eclectic group of NICHE SPECIALISTS. All of whom are handpicked. Our divisions include Property Management, Celeb & Sports, WLH Studios, Artificial Intelligence, Developer Sales, and our upcoming commercial department. Bottom line is we know this market. And more importantly, how to represent our clients' BEST INTERESTS. If you'd like to learn more, feel free to let us know.

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