Market Recap: Fed Cuts Rates, Home Price Appreciation Slows, Pending Home Sales Jump
As expected, the Federal Open Market Committee voted to lower the federal benchmark interest rate to a targeted range of 1.5-1.75%. Mortgage rates will likely trend downward as a result. The S&P Core-Logic Case-Shiller home price index depreciated month-over-month and moved up just slightly year-over-year. The pending home sales index climbed.
The FOMC met on Tuesday and Wednesday of this week and voted in favor of a quarter point rate cut, lowering the benchmark interest rate for the third time this year. The Fed cited global trade tensions as cause for the rate cut. The two dissenters, Boston Fed President Eric Rosengren and Kansas City Fed President Esther George argued economic growth is strong enough and easing is not necessary at this time.
The Case-Shiller home price index declined 0.2% month-over-month in August. Annually, the index is up just 2%, significantly below the average 5-6% annual gains last year. Despite the monthly decline, most cities saw slight appreciation. Only Las Vegas and New York posted month-over-month declines, and Detroit showed no monthly change. San Francisco was the only metro to decline annually, down just 0.1%. After months of accelerated home price appreciation, the data shows home prices may actually be stabilizing.
The pending home sales index improved again in September, up 1.5% month-over-month and 3.9% year-over-year. Regionally, the data was mixed. The Midwest and South posted increases in sales while the Northeast and West declined. National Association of Realtors (NAR) chief economist Lawrence Yun attributed the positive numbers to lower mortgage rates, commenting “the national buying power has increased 6% because of better interest rates. Contract signing would be higher if more housing was available.”
After this month’s rate cut, the Fed has signaled it will pause on further rate movement. Although global trade tensions have led to economic slowdown, the United States job market is still exceptionally strong. If consumer spending picks up this holiday season, the economy will strengthen.
Sources: MarketWatch, MarketWatch, MarketWatch, MarketWatch, Mortgage News Daily