NEW ORLEANS (WVUE) – Stocks surged on Friday (Aug. 23) after Federal Reserve Chair Jerome Powell hinted at a possible policy shift during an economic conference in Jackson Hole, Wyoming.
Powell’s comments sparked optimism that interest rates, which have remained high for nearly four years, could soon be lowered.
“The time has come for policy to adjust, the direction of travel is clear and the timing of rate cuts will depend on incoming data,” said Powell.
The U.S. has seen some of its highest inflation rates in two decades over the past few years, leading the Federal Reserve to maintain high interest rates to curb economic overheating. With inflation now under 3%, Powell’s speech sent a signal the Fed is likely to cut interest rates in the coming weeks.
The potential rate cut is particularly significant for the New Orleans housing market, which has been on a roller coaster for the last four years. It was red hot when mortgage interest rates fell below 3%, but with current rates around 6.5%, housing has gone cold by most measures, leaving buyers hesitant.
Drew Remson, president of America’s Mortgage Resource in New Orleans, believes that while a 6% interest rate is historically reasonable, it has become a psychological barrier for many potential homebuyers, who are still anchored to the much lower rates seen during the pandemic.
“A 6% interest rate is kind of normal, but we’re in the mind frame of 2.5% and 3%, so psychologically there is a barrier for people,” said Remson.
While a reduction in interest rates could renew confidence among buyers, Remson says the ongoing property insurance crisis in Louisiana remains a significant hurdle. The soaring price of property insurance has dramatically driven up the cost of buying a home in Louisiana, overshadowing the potential benefits of lower mortgage rates. Remson says right now, insurance is the biggest factor in local home sales.
“I’ve basically found myself, in the mortgage business, that part of my job now is insurance. I spend an inordinate amount of my time helping to shop insurance, make sure they (clients) are exploring all their options,” said Remson.
INSURANCE CRISIS
For homes in the metro area to really start moving again, Remson says there has to be movement on the insurance front. With that in mind, Remson will continue to focus on finding options for property insurance.
“We’ve really kind of got to dig deeper and hold deals together by helping shop insurance,” said Remson.
The Federal Reserve is set to meet September 17-18 and analysts predict that an official announcement regarding the interest rate cut could be made during that meeting.
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Alice J. Roden started working for Trending Insurance News at the end of 2021. Alice grew up in Salt Lake City, UT. A writer with a vast insurance industry background Alice has help with several of the biggest insurance companies. Before joining Trending Insurance News, Alice briefly worked as a freelance journalist for several radio stations. She covers home, renters and other property insurance stories.