With its tenth rate hike in its battle against inflation, the Fed recently hinted that this may be the last but also emphasized that it would depend on new incoming data, according to a recent report by the California Association of Realtors (CAR).
The central bank’s Federal Open Market Committee (FOMC) approved its 10th interest rate hike of its benchmark borrowing rate by 0.25 percentage point, raising the Fed Funds Rate to a target range of 5%-5.25%, the highest since August 2007. After a little over a year of consecutive rate hikes the FOMC subtly suggested that the current tightening cycle has perhaps come to an end.
The labor market remains solid, meanwhile and once again has added more jobs than expected, in the most recent report. However, fewer job openings suggest that the 2-year labor shortage is beginning to normalize, said the CAR report.
Total nonfarm payroll employment rose by 253,000 in April, and the unemployment rate changed little at 3.4 percent, the U.S. Bureau of Labor Statistics reported last week. Employment continued to trend upward in professional and business services, health care, leisure and hospitality, and social assistance.
The total amount of housing construction spending also increased, though single-family outlays continued to weigh on residential spending, said CAR. Residential spending also dipped for the tenth month in a row.
At the same time, California’s population decline slowed last year as births stabilized, deaths decreased, and foreign immigration rebounded.
According to the CAR monthly member survey, market activity is gradually increasing as expected for the season. The shares of having listing appointments, entering escrow, and closing escrow all increased from the previous month, said the report.
New escrows (22.7%) and closed sales (23.3%) were at their highest levels in seven and nine months.
While listing appointments rose from the previous month, the share of those who actually listed a property was unchanged from the previous month at 18.3% – highlighting the dilemma for new listings and holding snug the inventory in the resale market.
With the greater competition, more than one-third of California realtors witnessed more than five offers made on each home – the biggest share in eleven months. Construction spending was also higher 0.3% during March, according to CAR, a 3.8% year-over-year gain.
Residential spending, however, recorded its 10th consecutive monthly decline, dipping 0.2% during the month and maintaining its pace below last year levels by 9.8%.
At the same time, while multi-family and home improvement spending rose during the month, single-family activity continues to be the biggest drag on residential spending, decreasing 0.8% from February and running 22.9% behind a year ago. Builders cited high interest rates, inflation, and higher development costs as impediments to growth.
The Fed acknowledged last week that while inflation has moderated somewhat, inflation is still the primary focus and pressure continues to run high, said the CAR report.
