As a follow-up to my overcapacity discussion last month, I don’t know how many times I have heard the phrase “higher for longer” from market analysts in the past six months, but I can tell you that the number has exceeded single digits by plenty. Everyone is accepting the fact that it is going to be a long, cold winter in the mortgage and real estate business. Or is it? The Fed held rates steady at the start of November despite a steady stream of strong economic news, and a few days later, we had a “weaker” jobs report.
Interest rates reacted like the sun was shining, moving down approximately one-half of 1% in a matter of a few days. Was this:
• An overreaction to the Fed decision and the jobs report?
• A technical bounce-back since rates had moved up so quickly the previous weeks?
• The start of a turn for the better?
If I knew the answer to these questions, it would be easier to plan for 2024. In essence, all of these scenarios are plausible — at the same time. It was likely a technical bounce that stemmed from an overreaction, which still could be signaling a change in direction. Confused? I did not say that predicting the future was all that easy.