Sep 09

Hey Fed, Play Like Gretzky—and Stop Chasing Rates

Let’s start with a happy twist: Mortgage rates dipped from around 7% to 6.5% in just two days—all thanks to the collapse of Silicon Valley Bank, which pushed investors toward the safest bet out there: U.S. government bonds. That drop can save you about $100 a month on a typical mortgage. Talk about a quick relief!

Inflation Is Slowing—but Still Chill

Inflation is cooling off, albeit slowly. It was at a scorching 9% in mid-2022, down to 6% by February 2023. But here’s the kicker—the Fed wants it to hit 2% before it feels comfortable pulling back on rates. That goal feels like it’s still a couple of years away, though a more realistic target of 3% to 4% by year-end seems doable.

Why Housing Costs Matter More Than Eggs

You might’ve noticed prices on everything—including eggs—feel high. But here’s the scoop: Eggs actually matter very little in the inflation mix (they account for just 0.2% of the average household budget). Meanwhile, shelter costs make up a whopping 34.4%. Rental inflation is still pushing 8.8%, but there’s light at the end of the tunnel: Apartment construction is booming at a 40-year high, which should lead to more vacancy and softening rents.

Go Where the Puck Is Headed

Channel your inner Wayne Gretzky for a sec—he famously said you’ve got to go where the puck is going, not where it is right now. The Fed should adopt that mindset: instead of reacting to current numbers, it should anticipate down the road and pause rate hikes.

A Small—but Real—Risk: U.S. Bonds

Here’s where it gets a bit tense. With the national debt spiraling near $30 trillion, even the “safe” U.S. bonds carry a risk. A default? Unlikely. But if Washington doesn’t get its act together, borrowing costs could rise—including for the government itself.

Bottom Line

  • Good news: Mortgage rates are dropping—and that means real savings each month.
  • Inflation is cooling, but the Fed still has its work cut out to reach the cozy 2% target.
  • Housing costs are huge—way more than tiny things like eggs. But more housing supply might start easing the pressure soon.
  • What the Fed needs to do: Stop just watching the data—start predicting where things are headed.
  • Final caveat: Even our safest investments can get shaky if government spending gets out of control.

Want to expand on any of these points? Maybe add a lifestyle angle, include some relatable examples, or structure it with Q&A style? Just let me know—happy to help!

Source: REALTOR® Magazine
“End Rate Hikes”
National Association of REALTORS®
Reprinted with permission

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