Greetings!
The Federal Reserve’s Open Market Committee (FOMC) didn’t exactly drop the other shoe after its January meeting on Wednesday, but it definitely loosened the laces.
The Fed left its fed funds rate at zero, but its Chair, Jerome H. Powell, said “the committee is of a mind” to raise rates at their next meeting in March. The economy no longer needs sustained high levels of support, he said.
The consensus is for three or four rate hikes this year. In the past, the FOMC has typically bumped rates up (or down) by a quarter point, but given the current economic conditions, analysts say a half point would not be surprising.
New Home Sales Up Sharply
The new home sales report was a good one, sales were up 11.9% to 811,000 annual units, making December the best month since last March.
Probably the best news in the report was the near 58% increase in the number of available new homes compared to December 2020. The U.S. Census Bureau reported a total of 403,000 newly-constructed homes on the market compared to 299,000 a year earlier and a 6.0-month supply compared to 3.8 months back then. December was the second consecutive month that the new home inventory was at or above six months, usually considered the benchmark of a balanced market.
There were 762,000 new homes sold in 2021, a 7.3% decline from the 822,000 total in 2020. Still, given the delays in construction due to supply chain issues, the explosive growth of lumber prices, and the meager inventories in the first third of the year, the market held up pretty well.
Demand Remains High
According to Freddie Mac: “Recent rate increases have yet to significantly impact purchase demand, as history demonstrates that potential homebuyers who are on the fence will often enter the market at the start of rate increase cycles. We do expect rates to continue to increase but at a more gradual pace.” Please call or email us to find out about home buying, selling, or refinancing while rates are still historically low.
