Federal Reserve Announcement
Liz Schneider, President, North Coast Building Industry Association
The Federal Reserve ended its two-day meeting of its policy making committee by announcing it would hold short term interest rates steady and signaling that it will carefully evaluate future economic conditions before considering another rate hike.
NAHB (National Association of Home Builders) Chief Economist Robert Dietz provided the following analysis of the Fed’s decision and how it could affect the housing market:
“As expected, the Federal Reserve’s monetary policy body, the Federal Open Market Committee, unanimously held steady the federal funds top rate at 2.5%. The Fed’s January statement was consistent with recent policymakers’ comments suggesting a more flexible stance toward monetary policy at the end of last year and the start of 2019.
“In particular, the statement indicated that the Fed will ‘be patient as it determines what future adjustments to the target range for the federal funds rate may be appropriate to support these outcomes.’ This is decidedly more dovish stance for the Fed relative to commentary from the Fall of 2018, reflecting anchored inflation expectations and economic softness in some sectors, including housing, as illustrated by today’s December pending home sales data from the National Association of Realtors.
“Moreover, the Fed, in an accompanying statement, noted that it could modify its ongoing balance sheet reduction, which reduces its net holding of Treasury bonds and mortgage-backed securities, leading to higher rates (quantitative tightening). If economic conditions warrant such a change. This revision notes that the Fed would ‘be prepared to use its full range of tools, including altering the size and composition of its balance sheet, if future economic conditions were to warrant a more accommodative monetary policy than can be achieved solely by reducing the federal funds rate.’
“In combination, these changes to the Fed’s monetary policy stance are more favorable for housing marketing conditions in 2019, which are currently challenged by growing concerns over housing affordability and sluggish growth for home building.
Pending home sales declined as a whole in December, 2018 but for the second straight month the Western region experienced a slight increase, according to the National Association of Realtors®. The Pending Home Sales Index in the Northeast rose 2.0 percent to 93.2 in December, 2018 and is now 2.5 percent below a year ago.
The building industry is experiencing a slow down due to lot shortages, labor shortage, and supply costs rising. All 3 of these factors are causing new home prices to rise. This is causing current homeowners to remodel their current home & not move or build a new home. If you’re looking for a remodeling contractor- check the listing of contractors on our website-www.ncbia.com. The North Coast Building Industry Association’s website has a plethora of information if you’re thinking about remodeling your current home or building a new home.
The North Coast Building Industry Association is your local not-for-profit trade association representing member companies involved in all aspects of home building, remodeling, and other aspects of services available to help you in the future. So, you can see it is for your protection that you use a NCBIA member. If you are unsure that your contractor is a member of the NCBIA or you are looking for a list of NCBIA members, you can visit our website at www.ncbia.com or call 440-934-1090. We also have a job posting board (under the Industry tab). Like us or better yet share us on Facebook!
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