March 25, 2025 – Wait and See Attitude

Economic Commentary

The Federal Reserve’s Open Market Committee met last week and as expected, they did not lower or raise their benchmark interest rate. Despite evidence of a softening of the economic climate, they choose to sit back and wait to see what the effects will be as certain new policies are implemented by the Administration. There certainly has been a whirlwind of activity emanating from the government sector and while everyone is hoping for a positive economic response, the markets have shown more anxiety than anything as of this time.

So, what would it take for the Fed to come in and make such a move?  If the economy slowed down enough to threaten a recession, one would think we would see actions to lower interest rates further. On the other hand, if these policies cause a regeneration of inflationary pressures, we could actually see the Fed raise interest rates from their present levels.  The real concern is an economic slowdown accompanied by inflation, which is known as stagflation, which would put the Fed in a quandary.

Certainly, it is too early in the game to predict any of these scenarios, which is why the Fed has decided to adopt their wait and see attitude. The initial reaction of the markets is often not indicative of long-term trends. The markets often react to change negatively. On the other hand, there are plenty of times that the markets reactions are on point and thus we should not ignore the messages being displayed. What we can say is that this year is starting out with a lot of fireworks, and it looks like we could be in for quite a wild ride. Fasten your seatbelts.

Weekly Interest Rate Overview

The Markets. The Freddie Mac rate survey was flat for the second straight week, with little reaction to the Fed holding interest rates steady.  Though their statement regarding an increased risk of recession, though not imminent, certainly raised some eyebrows.  30-year fixed rates increased slightly to 6.67% from 6.65% the week before. In addition, 15-year loans rose to 5.83%. A year ago, 30-year fixed rates averaged 6.87%, slightly higher than today. Attributed to Sam Khater, Chief Economist, Freddie Mac, “The 30-year fixed-rate mortgage has stayed under 7% for nine consecutive weeks, which is helpful for potential buyers and sellers alike.”  Note: Rates indicated do not include fees and points and are provided for evidence of trends only. They should not be used for comparison purposes.

Real Estate News

During the remote work boom, 25% of employees were living in a different city or region from their company’s office — either because they relocated during this period (12%) or were hired as remote workers (13%). Meanwhile, 75% of employees remained or accepted jobs in the same city or region as their office. Workers who relocated did so for lifestyle or financial reasons. More specifically, 46% moved to a more desirable location, 44% sought a more affordable area, 34% moved closer to family, and 30% relocated for a spouse or partner. Now, with more companies enforcing RTO mandates, 19% of remote workers have already moved back, and 60% plan to relocate to comply. However, 21% do not intend to move, with 40% planning to find a new job.  Among the 21% of workers who are unwilling to relocate, 40% found a new job instead. Even among those planning to move back, many first attempted to secure a different job. In fact, 56% of relocating workers sought a new job before deciding to move, but 33% received no offers, and 63% felt the offers weren’t worth taking. A small portion (4%) cited other reasons for ultimately relocating.  Workers relocating due to RTO are facing financial strain. Among those who have already moved, 34% report paying higher rent or mortgage, 32% have downsized to a smaller home, and 22% moved in with family or roommates to offset costs. Additionally, 19% had to break a lease or sell a home unexpectedly. To accommodate these changes, many workers are turning to storage solutions. A total of 69% have rented or plan to rent a storage unit due to their shifting living situation.  Source: StorageUnits.com

As inflation continues to shape consumer behavior, Americans are adjusting their financial habits, delaying major life plans, and seeking new ways to manage their money. According to the second annual Wells Fargo Money Study, 76% of Americans have cut back on spending, a notable increase from 67% in 2024. The impact is even more pronounced among younger generations, with 82% of Gen Z adults and 79% of Millennials reporting reduced spending. Even among teens, 60% say they are spending less in response to economic conditions.  “Consumer behaviors are shifting. The value of the dollar and what it is providing may not be as predictable anymore, which seems to be more pronounced for younger Americans,” said Michael Liersch, Head of Advice and Planning at Wells Fargo. With higher prices stretching household budgets, 60% of Americans say they are making tough financial choices, and 55% report delaying major life plans, including travel, home renovations, moving, education, marriage and retirement.   The study underscores the reality that many households are struggling to balance financial goals with the rising cost of living.  A major driver of these shifting behaviors is continued sticker shock, with 90% of Americans reporting surprise at the cost of common expenses like dining out, event tickets, and even bottled water. While inflation continues to impact household budgets, many consumers are actively working to reshape spending habits and align financial decisions with long-term objectives.  Source: MortgagePoint

Older Americans who seek out younger roommates to stay on top of high housing costs is not a new concept, but there is evidence to suggest that the trend is growing more popular. This is according to Boston-based NPR affiliate WBUR. Jennifer Molinsky, director of the Housing an Aging Society Program at Harvard University‘s Joint Center for Housing Studies (JCHS), described how the idea of baby boomers seeking out roommates could be gaining favor among an older populace that is challenged to make ends meet with housing while living on a fixed income. “Among older adults, it’s just under a million people are living with unrelated other folks and without any other family,” Molinsky said. “And that’s under 2% of the older adult population. The data suggests growth in these living arrangements, she explained. “The numbers have grown,” Molinsky said. “That’s doubled since 2006 as the older population has grown, and it’s edging up in the percentile as well. […] I think there’s a number of reasons. Housing costs are rising all across the age [and] income spectrums. The population is growing older more quickly. The 80-and-over population is expected to double over the next 20 years, Molinsky said, and with that growth also comes the recognition of certain realities that seniors face. “We’re recognizing both the dangers of social isolation and also the need for older adults — especially when they reach their late seventies, eighties and beyond — to have some more help around the house. So, I think all these reasons are combining to make this model particularly attractive.” Of the 56 million older U.S. adults, roughly 15 million live alone, Molinsky said. Many of these people are also mismatched to their homes, meaning that the homes are far larger than they need or they are unable to properly maintain them. “I think it just shows that there’s a big potential. Most older adults do live in single family homes. Most single-family homes have more than one bedroom.”  Source: HousingWire