That's right. it looks like the labor market may finally be cooling, and that's the one major piece of the puzzle that we've been missing before the Fed shows any signs of cutting interest rates. 

The markets - ecstatic over the news - caused interest rates to fall dramatically. The average rate for a 30-year fixed rate conventional loan FELL AGAIN (back to back wins) - current average sits at 6.713% - down a whopping 1/8% from last week.

If that doesn't seem like a big drop, check this out: on a $400,000 loan, a 1/8% drop in rate will SAVE you about $400 every year in interest costs! Sign up for our weekly Friday rate texts to see all the great options LendFriend provides to homebuyers! 

Let's take a look at why last week was a great week for homebuyers.

Powell Went To Congress last week...

And rate cuts were on the tip of everyone's tongue. Congress asked Powell in about 50 different ways "when can we expect to see rate cuts?!"

As expected, Powell gave no clear indication beyond what we've heard from nearly every other member of the Fed. The Fed needs to see MORE EVIDENCE that inflation is under control.

“We don’t want to have a situation where where it turns out that the six months of good inflation data we had last year didn’t turn out to be an accurate signal of where underlying inflation is” he said.

Even so,  the market was happy that Powell's tone wasn't more negative and even happier to hear that rate cuts are definitely on the table for this year (sorry, Chief Economist Stolk). 

February Data shows that the Labor Market appears to FINALLY be cooling...

It's something we've been waiting to see for MONTHS. Layoffs continue to get announced but there were no signs of weakness in the labor data... until last week.

Hirings and job openings both fell from January to February and the unemployment rate ticked up from 3.7% to 3.9%! We know the Fed wants to see unemployment rate above 4% but we aren't sure how high the unemployment rate needs to be before the Fed is comfortable the labor market has sufficiently cooled.

Biden wants to give homebuyers a $10,000 tax credit

During his State of the Union address, President Biden discussed housing affordability and the need for the government to provide a tax credit to first-time homebuyers and those selling their starter homes to upgrade.

While this is a nice idea, we just came from a period where Americans had access to free money during the pandemic, and it led to a multi-year long fight against inflation. If everyone has access to this tax credit, it may put us right back to where we started as buyers try to outbid each other with free money.

Keep in mind that shelter costs still account for nearly 2/3rd of the rise in inflation today!  The issue today is less about buyer demand and more about supply because there's just not enough inventory out there to reduce home prices. An increase in supply and a decrease in home prices would do wonders to thawing this housing market freeze while rates are at these levels.

In other news...

Bitcoin is breaking records. Topping over $70,000 per BTC. Proponents say "its going to the moon" and critics say there's no real value. JP Morgan has said that Bitcoin's rise in value has created an additional complication for rate cuts. What's your take?

Another big week for data as inflation numbers come in. Great numbers will make for a very interesting Fed meeting next week. While 97% believe that the Fed will not cut rates in March and many are skeptical about a rate cut in May, good numbers could leave the door wide open for rate cuts in June!