03/23/2024
Weekly Market Update - Courtesy Nicholas Altman, Cross Country Mortgage
Helping you navigate the market
Status Quo for Fed
All eyes were on the Fed meeting this week. No surprises were revealed, and officials essentially maintained the status quo in terms of the outlook for monetary policy. Fearing a more unfavorable outcome, investors were pleased, and mortgage rates ended the week a little lower.
As expected, the Fed made no change in the federal funds rate. The primary focus of investors for this meeting was the future path that officials anticipate for rates, and their median forecast remains for three 25 basis point rate cuts this year. Of note, though, the spread between officials grew narrower, meaning that there was less deviation in the higher and the lower individual forecasts from the median. In short, they are now more closely aligned with the consensus outlook. Officials also significantly raised their projections for GDP growth, reflecting the solid performance of the economy in recent months.
Investors anticipate that the first rate cut will take place in June or July, similar to their expectations prior to the meeting. The timing will primarily depend on the inflation data in coming months. The big question is whether the uptick in inflation in January and February was mostly due to temporary seasonal quirks or whether it indicates that the downward trend has stalled. In his press conference following the meeting, Fed Chair Powell suggested that inflation likely remains on a gradual downward path to the target rate of 2.0% annually.
Sales of existing homes in February jumped 10% from January, far above the consensus forecast, but still were a little lower than last year at this time. Inventory levels remain stuck near historic lows, standing at just a 2.9-month supply nationally, far below the 6-month supply typical in a balanced market. The median existing-home price of $384,500 was 6% higher than last year at this time.
Given the severe shortage of homes in many regions, additional inventory continues to be desperately needed, and the data released this week was encouraging. In February, single-family housing starts surged 12% from January to the highest level since April 2022 and were 35% higher than a year ago. Single-family building permits, a leading indicator of future construction, climbed to the best level since May 2022. Finally, a separate survey of home builder sentiment on housing market conditions from the NAHB unexpectedly rose to an eight-month high.
Week ahead
Investors will continue to watch for Fed officials to elaborate on their plans for future monetary policy. For economic reports, New Home Sales will be released on Monday. Personal Income and the PCE price index, the inflation indicator favored by the Fed, will come out on Thursday. Mortgage markets will close early on Thursday and will be closed on Friday in observance of Good Friday.
