The government was shut down for a record 43 days and … the mortgage and real estate industries hardly noticed.
We had one flood insurance issue at JVM, but our buyer was able to find private flood insurance that actually turned out to be cheaper.
What was most notable to me was how steady interest rates were during most of the shutdown, with one exception.
While rates trended downward until late October, there were no spikes because no government reports were released, and those reports (GDP, employment, and inflation) can and do significantly impact rates.
Hot inflation reports and strong economic reports push rates higher, while cool inflation and weak economic reports bring rates down.
The only time rates moved significantly over the last 43 days was the day the Fed “cut rates” (cut the Fed Funds Rate) at the end of October.
Rates shot higher in response to “hawkish” comments by Fed Chair Powell, in which he indicated that additional rate cuts were far from certain.
The bond market was so starved for data that it was ready to respond to anything, and respond it did, as rates climbed about 1/4% over the following few days.
Anyway – now that the government is reopening, we will likely see a much more volatile interest rate environment.
Not only will we resume receiving the regularly scheduled government reports, but we will also receive many of the reports that were missed during the shutdown (although I am seeing reports on X that say the White House might not require the release of some of them, which makes me think “hmmm”).
These reports include the key inflation reports (CPI, PPI, and PCE), as well as non-farm payroll and GDP reports – and all can have a huge impact on rates.
So – now that the government is open, we can expect a lot more volatility in rates and interest rate charts that look like Charlie Brown’s shirt.
And even with all of that volatility, I still expect rates to trend downward in response to the many weaknesses we’re seeing in the economy.
