Market Forecast: Existing Home Sales, New Home Sales, and FOMC Meeting

Blog posted On March 19, 2018

Mortgage rates trended slightly downward last week, following a few weeks of steady increases.  New tariffs on construction materials have caused political discord and could stall home building activity.  The Federal Open Market Committee (FOMC) will meet Tuesday and Wednesday for their semi-annual monetary policy meeting.  A press conference with Federal Reserve Chair Jerome Powell is scheduled for Wednesday.  February’s existing home sales and new home sales reports are also scheduled for release.

A federal interest rate hike is a near certainty, according to most financial analysts.  Though consumer spending has scaled back, and the inflation rate is still below the Fed’s target, the job market is strong, and unemployment continues to break record lows.  One metric from the Atlanta Fed regional bank even suggested an 11% chance of a 50-basis point rate hike, but most market analysts argue such a significant rate hike at this time is unwarranted.

Existing home sales or resales make up the majority of real estate transactions.  In January, existing home sales were down 3.2% month-over-month.  The National Association of Realtors' (NAR) chief economist attributed the slowdown to a lack of for sale inventory.  Based on January’s numbers, it would take approximately 3.4 months to exhaust current inventory. 

New home sales count the sales of newly constructed homes.  New home sales were also hurting in January, down 7.8% month-over-month.  Cold winter weather has slowed construction activity and contributed to the limited availability of houses for sale.  Home builder sentiment scaled back slightly in March, but sustained buyer demand is likely to continue the need for new construction.

Financial markets are largely expecting a March rate hike.  It is widely thought that the Fed would not move interest rates at a meeting without an ensuing press conference.  Federal Reserve Chair Powell’s press conference will give journalists a chance to interview the new Fed chair about his policy plans for the rest of the year and the Fed’s thoughts on economic growth and inflation.  Though Powell is considered more hawkish than Yellen, the central bank’s trajectory for monetary policy is not likely to change drastically.

Sources: Bloomberg, CNBC, CNBC, MarketWatch, MarketWatch, Mortgage News Daily