Blog posted On March 22, 2019
The Federal Open Market Committee (FOMC) met Tuesday and Wednesday and voted to leave the federal benchmark interest rate unchanged. In turn, mortgage rates plunged following the news, hovering around year-long lows. The National Association of Home Builders’ (NAHB) housing market index was unchanged in March. Existing home sales surged to the highest level in almost a year.
The NAHB housing market index was unchanged in March, reading 62. Current sales conditions improved to a level of 68 and sales expectations for the next six months jumped to 71, but buyer foot traffic declined to a level of 44. Any reading above 50 is considered positive. NAHB Chairman Greg Ugalde stated, “builders report the market is stabilizing following the slowdown at the end of 2018, and they anticipate a solid spring home buying season.”
In addition to leaving the federal benchmark interest rate unchanged, the FOMC signaled it would hold off on further rate hikes this year. Federal Reserve Chair Jerome Powell attributed the decision to global economic slowdown specifically in Europe and China. Although the United States has also experienced less growth in recent months, January saw economic activity increasing at a solid rate. The Fed’s decision has already started to impact mortgage rates, with average rates trending downward following the news.
Existing home sales or resales increased 11.8% month-over-month in February to a seasonally adjusted annual rate of 5.51 million units. Sales rose in every region except the Northeast, where sales were unchanged. At this pace, it would take 3.5 months to exhaust all available inventory, well below the six to seven months’ supply that is considered a healthy balance between supply and demand.
The pause in rate hikes will likely impact mortgage rates in the coming months. After Wednesday’s announcement, average mortgage rates trended downward and will likely continue to hover these lower levels.