How Is the Fed’s Pause on Rate Hikes Affecting the Housing Market? | Topouzis & Associates, P.C.


June 01, 2019

How Is the Fed’s Pause on Rate Hikes Affecting the Housing Market?

How Is the Fed’s Pause on Rate Hikes Affecting the Housing Market?

The Fed has paused its schedule of rate hikes, and this appears to be having beneficial effect on the housing market alongside the broader economy, according to Fannie Mae’s February Economic Forecast, which is prepared by Fannie Mae’s Economic and Research Group. The report maintained Fannie’s previous projection that the GDP would undergo a 2.2 percent full-year growth over the course of 2019 (down overall from 3.1 percent growth in 2018), noting that slowing growth in the global economy and uncertainty in the realm of trade (in particular the widening trade deficit) remain risks. Yet the “patience” the Fed has shown on raising rates—having seen no sign of accelerating inflation—has taken the financial conditions out of the pressure-cooker. Meanwhile the labor pool is expanding, resulting in lower pressure in the area of wages. Together these appear to mediate the risks noted above.

While we still may see a rate hike in the middle of 2019, that does not affect the projection, the report suggests.

Fannie’s Economic and Research Group believes that home sales will continue to be flat over the course of 2019, though the decline in sales that we saw in late 2018 and January 2019 will likely ease (which February’s numbers seem to support), because of the slowdown in price-growth and the pause on interest rate increases. But there are nonetheless likely to be fewer mortgage originations through 2019.

Still, there are some overblown suggestions that the housing market is in a perilous position. The lingering effects of the so-called Great Recession can be seen at this point mainly in the jitters that arise each time we see a slight downturn in the market. Cyclical downturns are part of a normal, functioning market, and should not be perceived as a crisis.

So it’s a good time to buy a home. Our team here at Topouzis & Associates, P.C. does everything we can to be absolutely sure our clients are conveying and purchasing title clear of judgments and defects. And, yes, we help our clients put into place a good policy of title insurance to make certain they don’t get surprised by any nasty lurking issues with a property. Contact us if you’d like us to do this for you.