Unless you’re one of the very rare people who conducts all business using cash, interest rates matter to you.
At its most recent meeting, the Federal Reserve decided to leave interest rates where they are. University of San Diego economics professor Alan Gin said that’s good for all of us.
“It’s likely that the Federal Reserve is going to do the opposite in 2024, loosen up the money supply, get more funds out there, and then that should have a depressing effect on interest rates in the sense that they will start coming down," he said.
That will mean more affordable rates on credit cards and auto loans.
But the biggie, especially in an expensive housing market like San Diego, is the effect all of this will have on mortgage rates, which is welcome news to Mike Hoyt, a loan officer with AmeriHome Mortgage.
“I would say November was probably the quietest month I’ve had in my entire career,” he said.
Hoyt's been in the mortgage business for more than 20 years. He said the November lull is now in the rearview mirror.
“Over the last three weeks or so — four weeks, the pre-approvals have just shot through the roof," Hoyt said. "I mean, we’re getting probably like five to 10 requests a week when there was zero in November."
But he also said there’s a fly in the real estate market. Over the last several years, many people have locked in very low interest rates, and that translates to a problem that’s dogged the market for quite some time — a lack of inventory.
“Why would you sell? I’m gonna go leave this really low interest rate at 2 or 3% and go pay 8% and twice the amount for a new home," said Hoyt.
Hoyt said that issue will probably begin to resolve itself if and when mortgage rates get back into the 5% range.
As to the broader economic outlook, predictions of a recession in 2023 so far have not come true.
Gin said the elusive “soft landing” appears to be in our financial future.
“The unemployment rate is still pretty low despite these high interest rates," he said. "It was supposed to slow down the economy, maybe tighten things up, but the unemployment rate is still below 4% ... And the rate of inflation has come down significantly. So at one point, I think it was almost 9%. But now the latest reports showed that the rate of inflation is around 3%."
So, as we head into the end of the year, perhaps we can expect fewer financial lumps of coal and a brighter economic year ahead.
