Daily Spotlight: Help for Housing is On the Way

Summary

Housing is in a summer slump, but help is on the way. A 50-basis-point decline in the 30-year mortgage rate since June and a likely rate cut from the Fed may not solve all of the market’s affordability issues — but they sure will help. Housing starts fell to an annual rate of 1.24 million in July, which is the lowest pace in more than four years according to data from the Department of Housing and Urban Development and the Census Bureau. Starts peaked at 1.8 million in April 2022, just a month after the Fed’s first of 11 interest rate hikes in March 2022. Tighter monetary policy ended a long recovery from the Great Recession of 2007-2009. Signs that the Fed is poised to ease policy and reduce the funds target could bring buyers back into the market. “Better inflation data points to the Federal Reserve moving to cut interest rates possibly as early as September, and with interest rates expected to moderate in the months ahead, this will help both buyers and builders who are dealing with tight lending conditions,” said Robert Dietz, chief economist of the National Association of Homebuilders. From a housing perspective, relief can’t come soon enough. Based on the August 16 GDPNow estimate from the Atlanta Fed, residential fixed investment is expected to decline by an annualized 11.7% in 3Q after a 1.4% drop in 2Q. Tomorrow, we expect the National Association of Realtors to report July Existing Home Sales of 4.0 million (SA