Those pundits believe that lowering rates will stimulate the housing market.  This may only be true for those who have the financial wherewithal with the necessary income, credit, and debt/income to secure a mortgage and be able to purchase.

This won’t make a huge difference for the mass majority as prices, although not increasing by double digits, are still rising due to the lack of inventory and current purchaser demand.  For prices to decrease, demand would also need to slow down sufficiently enough to cause this to occur along with major increases in inventory.

By the time you read this column, Jerome Powell will have reduced Fed Funds rates by either 25 or maybe as much as 50 basis points.  The U.S. government will be the biggest beneficiary of the lower rates as the interest on our National Debt of 35.3 trillion will be lower.

However, we will still pay at least 1 trillion dollars in interest yearly if not more.  I believe the number one reason for lower rates was to decrease the cost of that debt.  The side benefit will allow a few more people to afford their home purchase.

Government figures show that inflation has been trending lower as prices are too.   Energy prices contracted 3.2% in August, led by crude oil down 6.2% and natural gas down 4.1%.  Non-energy prices eased 1.9%.  Food prices fell by 2.3%.  Raw materials gained by 1.8%.

However, some consumers may not agree with those figures and still feel the pinch of monthly costs in their pocketbooks.  Those with high credit card debt are enduring the greatest impact as their costs aren’t going down, but are increasing.  I have seen interest rates on credit card rates as high as 36% APR.

In 2013 the average interest rate on credit cards was 12.3%.  So the doubling plus of rates today has a monumental impact on consumers.  For those adding to their debt every month, purchasing a home is becoming an unreachable dream.  To add insult to injury, those who have student debt combined with their credit debt will potentially never experience the prospect of buying their first home.

Interest rates were increased over the last 2 years, inflation slowly came down.

Decreasing interest rates in turn may cause consumers to see the beneficial lowering of consumer prices as a good time to buy, and have the opposite effect by increasing inflation once again.  Moreover, if the Fed continues to increase the money supply, or does any bailouts for banks or consumers going forward, as it has previously done, it will exacerbate increased inflation.

Jerome Powell is walking a very narrow tightrope and must not only choose his words carefully, but his actions could have a major effect on our economic outcome.   Our economy has recovered faster and better than any other country.   Accessing and viewing the macroeconomics it all looks excellent on the surface.

But when you break it down via microeconomics and see the types of jobs that are being created, wages and salaries paid, personal and national debt, and layoffs that have and are occurring, things don’t look as rosy as they appear.

One cannot judge everything by those making huge sums of money; but by the average middle-class American, whose buying power has been diluted drastically by inflation over the last 10 years.

Viewing the stock market isn’t necessarily the barometer of how everyone is doing today.  If our inflation were 2% per year, then prices would double every 35 years; which lately hasn’t been the case as prices have increased dramatically over the last 4 years.

Unfortunately, those earning the U.S. standard minimum wage of $7.25 per hour will never become homeowners.

Even in states where the minimum wage is as high as $17 per hour in Washington D.C. and $16 per hour in NYC, Long Island, and Westchester, the rest of the State is $15 per hour, which will never be sufficient to buy a home.

Unless those earning hourly wages, have a second or even a third job and can save a substantial amount of money to make a huge downpayment; or someone gifting them the money, many families and individuals will not be able to purchase a home.

I don’t have an exact solution, but one must take certain calculated risks to become a business owner or at least have a side hustle to sock away money for your future purchase.

Even today higher education doesn’t necessarily guarantee earning a sufficient living to buy a home unless you specialize in a field that pays an above-average income.  However, student debt may hang over you for a lifetime, again not guaranteeing you the opportunity to buy.  If you have an entrepreneurial mindset, taking certain risks to earn more money, might be the path to pursue.  However, research and educate yourself on what you want to pursue and have enough money to fund your passion and then go for it.

Philip A. Raices is the owner/Broker of Turn Key Real Estate at 3 Grace Ave Suite 180 in Great Neck. For a free 15-minute consultation, value analysis of your home, or to answer any of your questions or concerns he can be reached by cell: (516) 647-4289 or by email: Phil@TurnKeyRealEstate.Com or via https://WWW.Li-RealEstate.Com