Post Fed Rate Cut Market Update

Interest rates have dominated the news this month, with the Fed’s long-anticipated rate cut finally taking place. The weaker-than-expected jobs report the previous week was the primary driver behind the decision. That report, combined with tame inflation data, led many to believe the Fed might cut rates by 0.5% rather than the 0.25% that was ultimately announced. The Fed’s statement following the cut offered little clarity on the path ahead, though markets are still pricing in two more cuts this year. However, comments from several members of the Federal Open Market Committee (FOMC) since last week’s meeting suggest that two additional cuts are far from certain. In fact, I wouldn’t be surprised if no further cuts occur unless unexpected negative economic data emerges.

Leading up to last week’s announcement, mortgage rates fell to three-year lows, sparking the strongest demand for mortgages in the same period, with both refinance and purchase applications surging. Unfortunately, since the rate cut, mortgage rates have ticked back up, causing demand to cool.

Locally, inventory levels in the Tri-Valley have remained relatively stable over the past month. Most cities have seen little change, except for Pleasanton and San Ramon, where inventory declined significantly. I expect inventory to gradually ease through the remainder of the year. If the experts are correct and we do see two more rate cuts, there could be a surge in market activity, though I remain cautious about that outcome.