the seattle rennie review | September 2024

interest rate cuts incoming The U.S. got its most clear signal that the Federal Reserve will cut interest rates in September when Jerome Powell gave his speech at Jackson Hole. More favorable borrowing rates, and more favorable resale conditions, are finally coming.

now (it was at a historic low of 3.4% as recent as April 2023), it is clear that higher interest rates are having a negative effect on the labor market. What’s more, the most recent revision to BLS jobs data showed employment growth was actually 818,000 jobs lower over the past year than previously reported (revisions are a normal part of the process though this revision was larger than is typical). As such, employment has become the primary concern of the Fed. Per Powell’s Jackson Hole speech, “we do not seek or welcome further cooling in labor market conditions.” Higher interest rates continued to have a negative effect on housing sales in August, too. Closed MLS sales of 2,256 across King Country came in 31% below the prior 10-year August average (of 3,261) and, on a year-to- date basis, sales of 17,052 were 24% below the prior 10-year average (of 22,419). It’s been a tough couple of years for sales in the region, but recent sentiment from the Fed and recent economic data point to more favorable borrowing rates in the near-term, which should unlock activity. Seattle may be a long way from Jackson Hole, but for now, the forecast for September is looking the same— expect lower borrowing costs.

Jerome Powell, the chair of the U.S. Federal Reserve, came out with his most clear signal that interest rates will decline at the Fed’s next interest rate announcement on September 18th, when he stated that “the time has come for policy to adjust.” These words were part of his August 23rd speech at the annual Jackson Hole Economic Symposium, one of the most highly anticipated events in the world of economics and a key barometer on the direction of the U.S. economy and monetary policy. The roughly 16 minute speech laid out why the Fed is feeling comfortable about easing interest rates, noting that “the upside risks to inflation have diminished, and the downside risks to employment have increased.” Put simply, the Fed is confident that it has defeated the highest inflation in a generation, and is now more concerned about a weakening labor market. Since the speech, updated inflation and employment data were released for the month of August that largely support a September

interest rate cut. Headline CPI fell to 2.5% year-over-year from 2.9% in July. Prior to then, the last time that inflation came in below the upper bound of the Fed’s target range (i.e., 3%) was back in March 2021. That said, not all news was good. Shelter costs continued to rise at uncomfortable levels (5.2%) and, as a result, core CPI, which excludes more volatile items like food and energy, actually ticked upward in August to 3.2%. What will give the Fed the confidence to see through this is that, excluding shelter, the vast majority (about 79%) of the CPI basket was growing below 3%. This was the most since pre-pandemic, evidence that broader inflationary pressures have indeed diminished. On the labor market front, the unemployment rate fell slightly in August to 4.2%, staving off concerns of a more serious downturn after a sharp rise in temporary layoffs caused the unemployment rate to jump to 4.3% in July. Still, with the unemployment rate on a sustained upward trend for more than a year

Information and statistics derived from Northwest Multiple Listing Service. Copyright © 2024 rennie group of companies. All rights reserved. This material may not be reproduced or distributed, in whole or in part, without the prior written permission of the rennie group of companies. Current as of September 9, 2024. While the information and data contained herein has been obtained from sources deemed reliable, accuracy cannot be guaranteed. rennie group of companies does not assume responsibility or liability for any inaccuracies. The recipient of the information should take steps as the recipient may deem necessary to verify the information prior to placing any reliance upon the information. The information contained within this report should not be used as an opinion of value, such opinions should and can be obtained from a rennie and associates advisor. All information is subject to change and any property may be withdrawn from the market at any time without notice or obligation to the recipient from rennie group of companies. E.&O.E.

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