Inflation notched down to 3.1% in November despite the incomprehensible rise of nearly 7% growth in housing rent. Once rents decelerate into a more realistic 2% to 4% rise in upcoming months, no doubt due to the oversupply of new apartment units hitting the market, then the overall consumer price inflation will be under the Federal Reserve's desired inflation rate of 2%. At that point, there is no excuse not to cut interest rates.

Knowing these trends, the bond and the mortgage market have already pivoted ahead of the Fed. Mortgage rates have come down for the 5th straight week. Even further declines are possible once the Fed actually does cut its short-term fed funds rates. Mortgage rates will slide under 7% next year and may reach 6% in a year.

Advertisement