In a recent announcement, Federal Reserve officials declared that they would maintain the current interest rates, leaving them at a 23-year high. This decision impacts a wide range of loans, including car loans, credit cards, and notably, mortgages, which will remain at their current levels for the foreseeable future.
Despite a recent dip in inflation, the Federal Reserve emphasized that inflation is still above desired levels. Their statement noted that inflation "remains elevated" and reaffirmed their commitment to bringing it down to their 2% target.
For many Americans, this means postponing significant life changes, particularly in the housing market. Peyton Megown, who owns the Trim-N-Proper hair salon in Colorado, has felt the economic instability keenly. "I feel like I can't really catch a break," Megown said. "But things are expensive for everyone."
Mallory Poux, the owner of Manpered salon in Denver, shares a similar sentiment. "I mean, I feel like it's up and down. There are folks who are doing really good," Poux said. "There are folks struggling. I think it's just finding that middle. I'm in the middle."
Both salon owners are in the market for new homes but are finding the high mortgage rates challenging. Megown is looking to move into a larger place and said, "Well, I'm trying, since I'm trying to get into a bigger place. I'm just trying to wait and see what I can get, if potentially I can get a house or if I'm going to be stuck in something that's still a little smaller, like a townhome or a bigger condo."
Poux has been trying to buy a house for over five years but finds the prices prohibitively high. "I've been trying to buy a house now for five-plus years and it's just, it's so expensive," Poux said.
Currently, the Federal Reserve's benchmark interest rate remains in the range of 5.25% to 5.5%. Some economists predict that a rate cut is not on the horizon. The annual inflation rate dropped to 3.3% in May according to the Consumer Price Index, still above the Fed's 2% target.
Aaron Cirksena, founder and CEO of MDRN Capital, explained the rationale behind the Fed's decision: "So, that's why they end up holding rates steady. The Fed was sort of raising rates to a point that they were hoping to cool off the economy to a degree. And if the economy cooled off and they saw inflation cooling off to a certain degree as well, then that was what was going to eventually let them know that they could start reducing rates again and they just haven't fully seen that yet. If you wanted to go out and get a mortgage and you were hoping to wait to maybe see a reduction in mortgage rates to see them come down, you might be waiting a long time."
As the Federal Reserve continues its efforts to manage inflation, potential homebuyers remain in a holding pattern, dealing with the challenges of high mortgage rates and an unpredictable economic environment.