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In this month's market update, we are going to take a look at new construction home sale improvements year over year and what this may mean for buyers and sellers that are motivated in the spring market. We'll also discuss the two new inflation reports and what they may mean for mortgage rates. And we're going to talk about some surprising news in regards to the Fed chair. All that and more in this month's market update.
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Welcome to this month's Market Update. As always, I'm joined today by my incredible partner and co-host, Ruben. Ruben, how are you? Good. How are you, Gabby? Doing really, really well. It's been a lot of fun, and we're still continuing to have the fun live here from Austin as we have our top 100 elite brokerage leaders as well as the top 100 agents and teams joining us here for Masterminds this week. Yeah, all new rooms. I think Gary stole ours this week, but we'll make do.
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That's right. I guess he always gets to be number one when it comes to room choices. You know, one of the things that I found refreshing to hear is just how well many of our associates are doing this year, because they're simply looking at tactics on how to help buyers and sellers in the season. They're looking at the market of the moment. And one of the things that is in alignment with the data that we have been able to see year over year has actually been around new construction home sales.
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Yeah, so I mean, we've had a couple of reports. They were delayed. We got both March and February just this month. But yeah, we've seen new home sales tick up. You know, they were up about 3.3% year over year, which is better than what existing home sales have been doing. And they ticked up around 7.5% from March.
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February to March, which is all good. You know, it's a survey-based report, so there's a pretty large margin of error in those numbers. So we'll see how they get adjusted as we go forward. But it's an interesting glimpse into a couple of things. Like, first off, like you were saying, like, it's a potential bright spot.
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Secondly, because new home sales are recorded at contract and not at closing, this is the first report we've had since the war started and interest rates started moving up. So the fact that they didn't decline is a potentially good sign for existing home sales as well, because we're seeing that contracts were still getting signed in March.
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for new construction despite the fact that interest rates have ticked up a little bit. That's right. And we have a couple of data points that we've both found interesting that may carry some meaning in regards to why new construction sales are up. The most interesting one that you shared with me prior to us starting the recording was, in fact, that square footage size in new construction has declined. Talk to us about that.
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Yeah, so that was a trend that really started, you know, they peaked around 2015. We saw average size of a new constructed house was around 2,700 square feet. They started declining. And then during the pandemic, when we got into that housing boom, they ticked back up again for a little while. They were back up around 2,500, 2,600 square feet. And since then, they've dropped back down as mortgage rates have trended up to around 2,400 square feet.
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more affordable homes. And I think the other trend we talked about is the fact that prices of new construction have also trended down more recently. That trend is only in the last couple of years, but this past month they were down about 6% from where they were last year, this time of year. And what this means for those who are thinking about buying new construction is now that you have potentially homes with less square footage, you are getting more economic prices for a new home.
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Yeah, so we also know builders have a little bit more wiggle room when they're negotiating deals. And it gives a buyer the opportunity to take advantage of those incentives and being able to buy something that could be brand new with adjusted wish lists. Maybe you don't need that extra room, yet you love to have a brand new home that you may not have to worry much about for the first 10 or 15 years of its lifespan, and you're getting incentives that might make it easier for yourself to get into a brand new home.
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It's similar on the seller side too, right? Because as sellers are outlining what the costs are for them to be able to close and frankly make a move, it might be easier for them to trade something old and for something new. And there are plenty of sellers out there, the baby boomers and the generations that are thinking about downsizing that might want to take advantage of those incentives now. Yeah. I mean, in the current market, you know, who's not sitting on low interest rates, right? Our home builders. So they're not locked into the houses that they're building. They have developments they need to finish that they're building out.
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And they also have margins to play with. Right when they're negotiating these deals, they can upgrade materials that are going into these houses as part of their negotiations. A lot of them have their own mortgage companies that can offer things like points on mortgages. So that's where we're seeing some emerging opportunities right now.
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And here's something that I would suggest that our listeners that are thinking that or that are working with buyers and sellers that are thinking about trading or getting into new construction could do. Number one are those concessions that we've been talking about, right? Number two is get really clear on what the builder incentives are, because to your point, Ruben, they change.
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frequently. And being on top of what it could mean can have a big impact on someone's down payment or ability to get into a new home. And right now, it seems to be an opportune time to be able to have the conversations by following up and circling back to the buyers and sellers that may be interested in it in this market.
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Yeah, and I think on the flip side of that, I think we've talked about this a little bit in the past, is if you are selling an existing home right now, you need to be aware of what's going on with the new construction market in your marketplace, right? Because those pricing moves, the size, the composition of those houses is going to matter in terms of how you're pricing your existing home. That's right. Plus, builders have more margins, so their ability to make a move when it comes to incentives at scale has a tremendous impact on what might be happening in a local market and new construction. Yeah.
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Yeah, so I think, you know, just generally speaking, we're kind of in a market right now where being aware at a minimum, right, of what's going on in new construction is going to be fairly important. Absolutely. Well, then that takes us to some of the news that we've been hearing in terms of the CPI report that was published and some of the impacts that we're seeing that are going to have impacts on interest rates and inflation.
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Yeah, so we had two reports actually on inflation from March. We had both the CPI report and the PCE report. The way they're different isn't too important. It's really the PCE report measure things a little bit more broadly, but it gets adjusted more frequently. So you'll see the CPI get used for things like inflation adjustments on contracts and stuff versus PCE is what the Fed prefers because it measures a few more things. And it also is going to be adjusted frequently to be the most kind of accurate measure in a lot of ways of inflation. Why do those reports matter to us?
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So they matter for a couple of reasons. It matters because of what people's expectations around inflation look like going forward, because that impacts mortgage rates. And also the more obvious one, which is it impacts how the Fed makes decisions. And that very clearly is going to impact our mortgage rates, right?
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So essentially what we saw is in March, you know, the obvious piece is that oil and gas prices jumped quite a bit. Gasoline prices in both reports were up like 20 plus percent. So we saw the inflation adjust – or the – sorry, the headline numbers that include food and energy were up quite a bit. Both of them were, you know, in the mid-threes now.
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That's something we need to pay attention to. When we adjusted for what we call core, which means we're removing energy prices and food prices, the CPI number was still only about 2.6%, but the PCE number was still in the low threes, and it ticked up quite a bit.
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So, you know, what that means is that we're still seeing relatively broad inflation showing up places. Places like the cost of health care are continuing to go up. Another place we've seen a decent bit of inflation is what we call like recreational durable goods, which basically means, you know, any kind of vehicle you would use just for fun, things like kayaks, a lot of electronics, TVs, things like that fall into that category.
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we're seeing those prices start to take up. And so the interesting thing here is that, you know, when we talked about tariff prices, this concern was that we'd see this jump in prices. And we talked about the fact that the Fed looks at that as, you know, they're going to watch it, see if it's a one-time adjustment. And if it is, they're relatively okay with something like that, like a quick jump in prices, even if it's a relatively noticeable one, if it stabilizes right after that, they're not going to feel the need to step in.
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Well, what we're starting to see emerging here is potentially a more kind of slow, steady upward march in some of these prices. And that's actually going to get the Fed's attention more than these quick jumps potentially. Right. So it's been interesting because in the last Fed meeting, we actually saw one of the highest levels of what we'd say, like dissent of disagreement with the decision.
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we've seen in really like decades and you know one person was dissenting along the lines of i think we should lower rates instead of red raise them but the other three dissenters were actually arguing about language in the statement that sort of into indicated to people that the fed was still looking to lower rates in the future they were saying that like they we should be looking at removing that language um
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under the kind of understanding that we need to start kind of preparing the market for the potential that rates could actually get increased if this inflation trend continues.
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So that's gotten a lot of attention in the news. You know, they still voted to hold rates steady, I think, for the rest of the year. That's probably what we're going to see right now. But it's something we need to keep our eyes on. So when people's expectations about inflation adjust over time and their expectations about Fed decisions start to look, you know, they start to assign a higher probability, essentially, that the Fed could raise rates sometime in the next year to five years. It puts upward pressure on mortgage rates. And we've seen that. Like rates today are sitting at around 3.5%. We started the year we...
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I'm sorry, not three and a half. That would be nice, wouldn't it? We'd all be buying real estate. They're sitting at around six and a half percent right now. At the beginning of the year, we were looking like we were going to dip below six percent. So we've had a little bit of a roller coaster ride where things were looking really good. Things bumped up. They came back down. And now they've just been up and down for the last month or so with everything that's happening internationally in terms of people moving into safer assets.
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There's just a lot of cash flowing around. And then also now this risk of what does potentially higher inflation mean for interest rate decisions going forward. If interest rates or if inflation continues to rise, remind us again, what will the impact ultimately be on the 10-year Treasury, which is the indicator that we're looking for that the Fed will measure and then make interest rates decisions around?
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Yeah, so simply put, they'll go up. So the 10-year Treasury will go up if inflation begins to trend upward due to anticipation that the Fed will have to raise short-term rates. And that'll push mortgage rates up. So it is the opposite of what we had originally forecasted. And all signs are beginning to point that this is the way that the direction, the trend in which we'll go.
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Yeah. So, you know, it's a risk we had on the board. Um, you know, our projections were largely for rates to slowly decline this year. Um, but, you know, we discussed at family reunion and a couple of times since then that the risk of inflation coming back, some event triggering it was there and we've seen what kind of event now could cause that. So what we don't know yet is how sustained the impact on prices will be. Um,
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We know oil and gas prices are quite elevated right now. I think I paid like $4.30 a gallon for gas this morning. And I'm sure a lot of our audience is experiencing that as well. Yeah, let's not talk about the West Coast and what might be happening with gas prices at the pump there. But yeah, you're absolutely correct. Yeah, and God forbid if you drive a diesel, you're really feeling it right now. That's right. So at the end of the day, consumers are sitting on their wallets now because we are continuing to see a tightening of the belt because of what is happening with consumer goods and at the pump.
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Yeah, you know, we're seeing hesitancy as a result, I think, both coming into the uncertainty we had around the job market, which those statistics have actually started to look a little bit better in terms of jobs. You know, things are relatively flat, unemployment still low. We're not seeing a rise in layoffs on a broad scale. You know, we see headlines around these big AI companies doing layoffs and stuff like that, big tech companies, but when you look at it holistically, yeah.
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We haven't seen a huge movement in terms of unemployment yet. So keep an eye on it. But that so far is actually holding steadier, which is something we were a little bit concerned about coming into this year. But we just injected a whole new type of uncertainty this last month into the market. So now we're going to deal with that for the next couple of months at least. Speaking of surprises, Ruben, another surprise was the news in regards to the Fed share.
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Yeah, so at the end of that Fed meeting we've just been talking about in his press conference, Jerome Powell, the current chairman of the Federal Reserve, announced he was staying on for his governorship. That's an unusual move. Traditionally, the Fed governor would resign even if he still had a board seat. So it's a little bit interesting the way all of this kind of works. We talked about it a little bit at Family Reunion, and maybe we've talked about it a little bit since in a couple of these episodes, but –
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Basically, you have the Fed board, which really is about regulating financial markets and banking, things like that, as well as being involved in monetary policy. You have presidents of individual Federal Reserve banks also.
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The committee that runs or decides what interest rates are going to do, short-term interest rates, that is, in any given meeting, is called the FOMC, the Open Market Committee. That committee is made up of a mix of those governors, the chairman of the Federal Reserve Board, and the individual bank presidents. You know, not all of them. They rotate through, essentially. They all get a vote.
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The chairman of the Federal Reserve Board traditionally has always also been elected the chairman of the FOMC. There's a vote. The FOMC gets to appoint – basically appoints somebody, vote on them. They become the chair that gets to manage the FOMC meetings. As a chairman of the federal board, you can also hold a board membership, right, a governorship.
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Simultaneously. And those terms may not directly align. So in this case, Jerome Powell still has like two years left on his board term, despite the fact that his term as chair is ending.
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Traditionally, just in order to kind of get out of the way of the next guy, you would step down, give up those extra two years. The president would then appoint someone into that seat and you would have a new chairman. So you basically have like kind of a two person movement into the committee. With Jerome Powell now staying in regard, and he's kind of just pointed out that he's not going to leave at a minimum until, you know, all of this stuff happening with the justice department and him get.
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settled out it's done but he could stay longer like i said he has a two-year term so he's going to be there it's going to be an interesting situation where you have a former chair now on the fomc while there's a new chair there's even a scenario where the current fomc could vote to have him stay the chair of the fomc despite there being a new chair of the fed so it could get quite dramatic
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in the economics world. What impact could this, I was just about to ask, what impact could this have for humans like you and me sitting here in Austin, Texas? What it's probably going to mean is there are going to be a little bit more contentious decision-making happening on the Fed. I think it'll mean that there's one less, potentially more dubbish appointee that could go in. In the end, I think it's going to wash out in terms of
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the decisions over the next six months are going to look very similar to the decisions we've seen over the last two or three years. Yes. Um, so I would expect it to still remain fairly like, I guess we've been, I would say a little bit hawkish over the last six months. So I think we're going to continue to see a lot of pause, like basically essentially just pauses and rates. Um,
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I think the odds that we're going to get even one rate cut this year continue to go down. I don't think it's likely at this point, especially with these two recent inflation reports. We'll have to watch. But in the end, it seems to have...
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for the most part, kind of been a wash in the markets. I think it created, instilled some confidence in some places and some concerns in some others. And as we've seen, mortgage rates are still, have trended up a bit. So we'll see what happens. But I think in the end, the Fed's just gonna continue to hold rates steady for a lot of this year, most likely.
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Well, and in light of the news and the realities, what realtors can do right now to be great fiduciaries to their clients is to let them know that this is what the rest of the year may look like. Sometimes, you know, we wonder if our clients are waiting, then they hear industry news like mortgage rates could adjust and the trend could go slightly down. And now is a great time to be able to explain what the economic data is showing so that clients that may have had this as an obstacle to make a move.
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may have different realizations in regards to how they might want to affect getting into a home. If there is motivation, then there is new construction accessibility that perhaps it's worth looking at again. And the opportunity to go back to sellers and to the previous showings that may have been had to run what those mortgage rates will look like. And if buyers who are motivated are want to take advantage of it, knowing that mortgage rates are not going to have a significant impact on the decision making.
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Yeah, I mean, one thing this does provide like one more piece of evidence for is kind of like dispelling the misconception that something's going to change at the Fed that's going to dramatically lower mortgage rates anytime soon. That's right. That's not going to happen.
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They really, the Fed doesn't set mortgage rates anyways. It's a big misconception out there. Yeah, so I would say, like, in the end, just expect rates to remain slightly elevated where they are. You know, the worse inflation reports are, the more likely that those rates are going to stay high. If inflation reports improve, we may see them start to slowly trend down. That's basically your two scenarios right now, like more of the same or things slightly trend down if inflation gets better.
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Yeah. The good news for our listeners is we'll continue to keep a close pulse on what is happening and we'll be able to synthesize what this may mean 30 days at a time. Yeah, absolutely. And of course, we'll continue to keep a close eye out on those reports and keep a pulse on the market as it will continue to change.
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Please also keep in mind to click like and subscribe to our podcast. It is my birthday month, so please share this with a friend as well and make sure that we get those double clicks. If you have questions as we are continuing to synthesize what the changes in the markets and the economy may mean, feel free to add them to our YouTube channel and we'll be sure to address them in the coming months. Until next month, we'll see you here at the Market Update podcast. Until then.
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In this month's market update, we are going to take a look at new construction home sale improvements year over year and what this may mean for buyers and sellers that are motivated in the spring market. We'll also discuss the two new inflation reports and what they may mean for mortgage rates. And we're going to talk about some surprising news in regards to the Fed chair. All that and more in this month's market update.
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Welcome to this month's Market Update. As always, I'm joined today by my incredible partner and co-host, Ruben. Ruben, how are you? Good. How are you, Gabby? Doing really, really well. It's been a lot of fun, and we're still continuing to have the fun live here from Austin as we have our top 100 elite brokerage leaders as well as the top 100 agents and teams joining us here for Masterminds this week. Yeah, all new rooms. I think Gary stole ours this week, but we'll make do.
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That's right. I guess he always gets to be number one when it comes to room choices. You know, one of the things that I found refreshing to hear is just how well many of our associates are doing this year, because they're simply looking at tactics on how to help buyers and sellers in the season. They're looking at the market of the moment. And one of the things that is in alignment with the data that we have been able to see year over year has actually been around new construction home sales.
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Yeah, so I mean, we've had a couple of reports. They were delayed. We got both March and February just this month. But yeah, we've seen new home sales tick up. You know, they were up about 3.3% year over year, which is better than what existing home sales have been doing. And they ticked up around 7.5% from March.
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February to March, which is all good. You know, it's a survey-based report, so there's a pretty large margin of error in those numbers. So we'll see how they get adjusted as we go forward. But it's an interesting glimpse into a couple of things. Like, first off, like you were saying, like, it's a potential bright spot.
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Secondly, because new home sales are recorded at contract and not at closing, this is the first report we've had since the war started and interest rates started moving up. So the fact that they didn't decline is a potentially good sign for existing home sales as well, because we're seeing that contracts were still getting signed in March.
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for new construction despite the fact that interest rates have ticked up a little bit. That's right. And we have a couple of data points that we've both found interesting that may carry some meaning in regards to why new construction sales are up. The most interesting one that you shared with me prior to us starting the recording was, in fact, that square footage size in new construction has declined. Talk to us about that.
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Yeah, so that was a trend that really started, you know, they peaked around 2015. We saw average size of a new constructed house was around 2,700 square feet. They started declining. And then during the pandemic, when we got into that housing boom, they ticked back up again for a little while. They were back up around 2,500, 2,600 square feet. And since then, they've dropped back down as mortgage rates have trended up to around 2,400 square feet.
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more affordable homes. And I think the other trend we talked about is the fact that prices of new construction have also trended down more recently. That trend is only in the last couple of years, but this past month they were down about 6% from where they were last year, this time of year. And what this means for those who are thinking about buying new construction is now that you have potentially homes with less square footage, you are getting more economic prices for a new home.
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Yeah, so we also know builders have a little bit more wiggle room when they're negotiating deals. And it gives a buyer the opportunity to take advantage of those incentives and being able to buy something that could be brand new with adjusted wish lists. Maybe you don't need that extra room, yet you love to have a brand new home that you may not have to worry much about for the first 10 or 15 years of its lifespan, and you're getting incentives that might make it easier for yourself to get into a brand new home.
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It's similar on the seller side too, right? Because as sellers are outlining what the costs are for them to be able to close and frankly make a move, it might be easier for them to trade something old and for something new. And there are plenty of sellers out there, the baby boomers and the generations that are thinking about downsizing that might want to take advantage of those incentives now. Yeah. I mean, in the current market, you know, who's not sitting on low interest rates, right? Our home builders. So they're not locked into the houses that they're building. They have developments they need to finish that they're building out.
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And they also have margins to play with. Right when they're negotiating these deals, they can upgrade materials that are going into these houses as part of their negotiations. A lot of them have their own mortgage companies that can offer things like points on mortgages. So that's where we're seeing some emerging opportunities right now.
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And here's something that I would suggest that our listeners that are thinking that or that are working with buyers and sellers that are thinking about trading or getting into new construction could do. Number one are those concessions that we've been talking about, right? Number two is get really clear on what the builder incentives are, because to your point, Ruben, they change.
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frequently. And being on top of what it could mean can have a big impact on someone's down payment or ability to get into a new home. And right now, it seems to be an opportune time to be able to have the conversations by following up and circling back to the buyers and sellers that may be interested in it in this market.
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Yeah, and I think on the flip side of that, I think we've talked about this a little bit in the past, is if you are selling an existing home right now, you need to be aware of what's going on with the new construction market in your marketplace, right? Because those pricing moves, the size, the composition of those houses is going to matter in terms of how you're pricing your existing home. That's right. Plus, builders have more margins, so their ability to make a move when it comes to incentives at scale has a tremendous impact on what might be happening in a local market and new construction. Yeah.
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Yeah, so I think, you know, just generally speaking, we're kind of in a market right now where being aware at a minimum, right, of what's going on in new construction is going to be fairly important. Absolutely. Well, then that takes us to some of the news that we've been hearing in terms of the CPI report that was published and some of the impacts that we're seeing that are going to have impacts on interest rates and inflation.
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Yeah, so we had two reports actually on inflation from March. We had both the CPI report and the PCE report. The way they're different isn't too important. It's really the PCE report measure things a little bit more broadly, but it gets adjusted more frequently. So you'll see the CPI get used for things like inflation adjustments on contracts and stuff versus PCE is what the Fed prefers because it measures a few more things. And it also is going to be adjusted frequently to be the most kind of accurate measure in a lot of ways of inflation. Why do those reports matter to us?
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So they matter for a couple of reasons. It matters because of what people's expectations around inflation look like going forward, because that impacts mortgage rates. And also the more obvious one, which is it impacts how the Fed makes decisions. And that very clearly is going to impact our mortgage rates, right?
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So essentially what we saw is in March, you know, the obvious piece is that oil and gas prices jumped quite a bit. Gasoline prices in both reports were up like 20 plus percent. So we saw the inflation adjust – or the – sorry, the headline numbers that include food and energy were up quite a bit. Both of them were, you know, in the mid-threes now.
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That's something we need to pay attention to. When we adjusted for what we call core, which means we're removing energy prices and food prices, the CPI number was still only about 2.6%, but the PCE number was still in the low threes, and it ticked up quite a bit.
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So, you know, what that means is that we're still seeing relatively broad inflation showing up places. Places like the cost of health care are continuing to go up. Another place we've seen a decent bit of inflation is what we call like recreational durable goods, which basically means, you know, any kind of vehicle you would use just for fun, things like kayaks, a lot of electronics, TVs, things like that fall into that category.
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we're seeing those prices start to take up. And so the interesting thing here is that, you know, when we talked about tariff prices, this concern was that we'd see this jump in prices. And we talked about the fact that the Fed looks at that as, you know, they're going to watch it, see if it's a one-time adjustment. And if it is, they're relatively okay with something like that, like a quick jump in prices, even if it's a relatively noticeable one, if it stabilizes right after that, they're not going to feel the need to step in.
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Well, what we're starting to see emerging here is potentially a more kind of slow, steady upward march in some of these prices. And that's actually going to get the Fed's attention more than these quick jumps potentially. Right. So it's been interesting because in the last Fed meeting, we actually saw one of the highest levels of what we'd say, like dissent of disagreement with the decision.
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we've seen in really like decades and you know one person was dissenting along the lines of i think we should lower rates instead of red raise them but the other three dissenters were actually arguing about language in the statement that sort of into indicated to people that the fed was still looking to lower rates in the future they were saying that like they we should be looking at removing that language um
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under the kind of understanding that we need to start kind of preparing the market for the potential that rates could actually get increased if this inflation trend continues.
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So that's gotten a lot of attention in the news. You know, they still voted to hold rates steady, I think, for the rest of the year. That's probably what we're going to see right now. But it's something we need to keep our eyes on. So when people's expectations about inflation adjust over time and their expectations about Fed decisions start to look, you know, they start to assign a higher probability, essentially, that the Fed could raise rates sometime in the next year to five years. It puts upward pressure on mortgage rates. And we've seen that. Like rates today are sitting at around 3.5%. We started the year we...
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I'm sorry, not three and a half. That would be nice, wouldn't it? We'd all be buying real estate. They're sitting at around six and a half percent right now. At the beginning of the year, we were looking like we were going to dip below six percent. So we've had a little bit of a roller coaster ride where things were looking really good. Things bumped up. They came back down. And now they've just been up and down for the last month or so with everything that's happening internationally in terms of people moving into safer assets.
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There's just a lot of cash flowing around. And then also now this risk of what does potentially higher inflation mean for interest rate decisions going forward. If interest rates or if inflation continues to rise, remind us again, what will the impact ultimately be on the 10-year Treasury, which is the indicator that we're looking for that the Fed will measure and then make interest rates decisions around?
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Yeah, so simply put, they'll go up. So the 10-year Treasury will go up if inflation begins to trend upward due to anticipation that the Fed will have to raise short-term rates. And that'll push mortgage rates up. So it is the opposite of what we had originally forecasted. And all signs are beginning to point that this is the way that the direction, the trend in which we'll go.
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Yeah. So, you know, it's a risk we had on the board. Um, you know, our projections were largely for rates to slowly decline this year. Um, but, you know, we discussed at family reunion and a couple of times since then that the risk of inflation coming back, some event triggering it was there and we've seen what kind of event now could cause that. So what we don't know yet is how sustained the impact on prices will be. Um,
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We know oil and gas prices are quite elevated right now. I think I paid like $4.30 a gallon for gas this morning. And I'm sure a lot of our audience is experiencing that as well. Yeah, let's not talk about the West Coast and what might be happening with gas prices at the pump there. But yeah, you're absolutely correct. Yeah, and God forbid if you drive a diesel, you're really feeling it right now. That's right. So at the end of the day, consumers are sitting on their wallets now because we are continuing to see a tightening of the belt because of what is happening with consumer goods and at the pump.
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Yeah, you know, we're seeing hesitancy as a result, I think, both coming into the uncertainty we had around the job market, which those statistics have actually started to look a little bit better in terms of jobs. You know, things are relatively flat, unemployment still low. We're not seeing a rise in layoffs on a broad scale. You know, we see headlines around these big AI companies doing layoffs and stuff like that, big tech companies, but when you look at it holistically, yeah.
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We haven't seen a huge movement in terms of unemployment yet. So keep an eye on it. But that so far is actually holding steadier, which is something we were a little bit concerned about coming into this year. But we just injected a whole new type of uncertainty this last month into the market. So now we're going to deal with that for the next couple of months at least. Speaking of surprises, Ruben, another surprise was the news in regards to the Fed share.
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Yeah, so at the end of that Fed meeting we've just been talking about in his press conference, Jerome Powell, the current chairman of the Federal Reserve, announced he was staying on for his governorship. That's an unusual move. Traditionally, the Fed governor would resign even if he still had a board seat. So it's a little bit interesting the way all of this kind of works. We talked about it a little bit at Family Reunion, and maybe we've talked about it a little bit since in a couple of these episodes, but –
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Basically, you have the Fed board, which really is about regulating financial markets and banking, things like that, as well as being involved in monetary policy. You have presidents of individual Federal Reserve banks also.
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The committee that runs or decides what interest rates are going to do, short-term interest rates, that is, in any given meeting, is called the FOMC, the Open Market Committee. That committee is made up of a mix of those governors, the chairman of the Federal Reserve Board, and the individual bank presidents. You know, not all of them. They rotate through, essentially. They all get a vote.
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The chairman of the Federal Reserve Board traditionally has always also been elected the chairman of the FOMC. There's a vote. The FOMC gets to appoint – basically appoints somebody, vote on them. They become the chair that gets to manage the FOMC meetings. As a chairman of the federal board, you can also hold a board membership, right, a governorship.
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Simultaneously. And those terms may not directly align. So in this case, Jerome Powell still has like two years left on his board term, despite the fact that his term as chair is ending.
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Traditionally, just in order to kind of get out of the way of the next guy, you would step down, give up those extra two years. The president would then appoint someone into that seat and you would have a new chairman. So you basically have like kind of a two person movement into the committee. With Jerome Powell now staying in regard, and he's kind of just pointed out that he's not going to leave at a minimum until, you know, all of this stuff happening with the justice department and him get.
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settled out it's done but he could stay longer like i said he has a two-year term so he's going to be there it's going to be an interesting situation where you have a former chair now on the fomc while there's a new chair there's even a scenario where the current fomc could vote to have him stay the chair of the fomc despite there being a new chair of the fed so it could get quite dramatic
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in the economics world. What impact could this, I was just about to ask, what impact could this have for humans like you and me sitting here in Austin, Texas? What it's probably going to mean is there are going to be a little bit more contentious decision-making happening on the Fed. I think it'll mean that there's one less, potentially more dubbish appointee that could go in. In the end, I think it's going to wash out in terms of
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the decisions over the next six months are going to look very similar to the decisions we've seen over the last two or three years. Yes. Um, so I would expect it to still remain fairly like, I guess we've been, I would say a little bit hawkish over the last six months. So I think we're going to continue to see a lot of pause, like basically essentially just pauses and rates. Um,
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I think the odds that we're going to get even one rate cut this year continue to go down. I don't think it's likely at this point, especially with these two recent inflation reports. We'll have to watch. But in the end, it seems to have...
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for the most part, kind of been a wash in the markets. I think it created, instilled some confidence in some places and some concerns in some others. And as we've seen, mortgage rates are still, have trended up a bit. So we'll see what happens. But I think in the end, the Fed's just gonna continue to hold rates steady for a lot of this year, most likely.
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Well, and in light of the news and the realities, what realtors can do right now to be great fiduciaries to their clients is to let them know that this is what the rest of the year may look like. Sometimes, you know, we wonder if our clients are waiting, then they hear industry news like mortgage rates could adjust and the trend could go slightly down. And now is a great time to be able to explain what the economic data is showing so that clients that may have had this as an obstacle to make a move.
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may have different realizations in regards to how they might want to affect getting into a home. If there is motivation, then there is new construction accessibility that perhaps it's worth looking at again. And the opportunity to go back to sellers and to the previous showings that may have been had to run what those mortgage rates will look like. And if buyers who are motivated are want to take advantage of it, knowing that mortgage rates are not going to have a significant impact on the decision making.
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Yeah, I mean, one thing this does provide like one more piece of evidence for is kind of like dispelling the misconception that something's going to change at the Fed that's going to dramatically lower mortgage rates anytime soon. That's right. That's not going to happen.
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They really, the Fed doesn't set mortgage rates anyways. It's a big misconception out there. Yeah, so I would say, like, in the end, just expect rates to remain slightly elevated where they are. You know, the worse inflation reports are, the more likely that those rates are going to stay high. If inflation reports improve, we may see them start to slowly trend down. That's basically your two scenarios right now, like more of the same or things slightly trend down if inflation gets better.
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Yeah. The good news for our listeners is we'll continue to keep a close pulse on what is happening and we'll be able to synthesize what this may mean 30 days at a time. Yeah, absolutely. And of course, we'll continue to keep a close eye out on those reports and keep a pulse on the market as it will continue to change.
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Please also keep in mind to click like and subscribe to our podcast. It is my birthday month, so please share this with a friend as well and make sure that we get those double clicks. If you have questions as we are continuing to synthesize what the changes in the markets and the economy may mean, feel free to add them to our YouTube channel and we'll be sure to address them in the coming months. Until next month, we'll see you here at the Market Update podcast. Until then.
