It’s the million-dollar question: where are rates going and will we get a rate cut this year? We wish we could give you a definitive answer so you could mark your calendars and start reaching out to all of those buyers or sellers who said “Let’s see what happens to rates.”

What we would like to do is give you some insight into what the data and markets are telling us today and how that is forecasting what the remainder of the year could look like.

At the beginning of 2024, there was speculation that we could get as many as six federal funds rate cuts. This would lower the cost of funds banks borrowed, which in turn would drive down interest rates on almost anything related to lending. Higher rates drive down demand, the economy slows, inflation retreats and therefore rates could come down.

Only four months later and the sentiment has changed. With only five Federal Open Market Committee meetings left, the odds of six rate cuts are diminishing. In fact, over half of 100 economists polled through Reuters believe a first cut will come in September — last month two-thirds of them expected that in June. So, what is keeping these rate cuts at bay?

• Inflation is being stubborn. While the cost of some goods and services has come down measurably since 2023, others such as food and energy have not seen the retreat, mainly due to increased demand. Simply put, people are still spending money — more money than they are taking in.

• The labor market is still strong. Overall, the labor market has been creating more jobs, and with more jobs comes more spending. Spending will do nothing to decrease demand which tends to keep prices elevated.

• Housing costs have remained elevated. It was predicted that the higher rates would cause housing prices to cool and with that lower housing costs. But because buyer demand is so strong, most markets are not seeing the cooling of housing costs as was predicted.

So, where do we go from here? The simple answer is that we live in the moment and we control the things we can control. Everything listed above is out of your control and in many cases, is also out of your client’s control. It comes down to having that empathetic, but factual conversation with your buyers and sellers about what their hopes, dreams, goals and plans are — not pegging those answers or decisions based on what the federal reserves do or don’t do.

What you can do is provide your clients the expertise of your buyer or selling team — which includes a Key Mortgage loan officer — to counsel and provide options and a path towards achieving their goals regardless of the current interest rate environment. Reach out to a Key Mortgage LO today and see how you can incorporate them into your buyer or seller consultations and come up with a holistic approach to their next real estate transaction.