Deco Realty Group Report #1

Deco believes those who predicted for the last year that mortgage rates would be dropping significantly by now clearly missed the mark. The question to be answered is where mortgage rates will be heading and what the South Florida housing market will be like over the next 24 months.

To understand what will occur, you must first understand the behavior of the Federal Reserve. The Federal Reserve had kept rates low for a long time, and money was cheap. At the same time, the government was creating additional social spending programs. As COVID restraint started easing, pent-up demand exploded, and inflation rose to over 9%.

The Fed reacted late as usual and then instituted 11 rate hikes from March 2022 through July 2023, hitting a 5.25% target rate. At that time, economists discussed whether there would be a hard or soft landing as part of a predicted recession, and the Fed indicated that they had achieved their goal and appeared ready to consider rate cuts.

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Ashley Gaffoglio
Ashley Gaffoglio, Owner of Deco Realty Group

I do not believe the predicted multiple rate cuts will occur in 2024, and the mortgage rates will stay above 6% for the entire year. This will occur for the following reasons:

  1. The Fed’s stated target inflation rate of 2% will not be achieved
  2. The job market will remain more robust than anticipated
  3. Stock indexes are hitting all-time highs as the economy continues to push forward
  4. The Fed should have continued raising rates to 5.75% to achieve their goals

There is a severe inventory shortage in the Palm Beach County housing market. In 2023, with mortgage rates soaring, many people put off buying, whether they wanted to downsize or relocate. So, while 2024 may be a flat year in some markets, the Palm Beach County market will continue to appreciate slightly (3-5%) throughout the year.

If there is a rate cut in 2024, it will be at the end of the year and more politically tied to the election than any economic logic. Rate cuts, however, will occur in 2025, reducing mortgage rates and allowing more people to qualify and pay more for homes. In 2025, home prices will rise again.

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As people flee from the northern urban tax-burdened cities and states and as people from Canada to Colombia look to relocate to Palm Beach County, Florida, sellers in this county will reap the rewards in 2025.

Florida is a highly desired tax-friendly state. Palm Beach County is even more attractive in terms of climate, economic opportunity, and quality of life in general. With reducing mortgage rates in 2025, the Palm Beach County market will heat up once more.

This article is for informational purposes only and does not constitute advice, a solicitation, or any recommendation. The views and opinions expressed herein are those of the author only and do not necessarily reflect those of any other entity.

Deco Realty Group

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