Not unexpectedly, the Federal Open Market Committee (FOMC) Wednesday left rates unchanged for a sixth straight meeting. Fed Chief Jerome Powell said it will take longer than expected to become confident about returning inflation to the Fed’s 2% goal
“We can be patient,” he said.
In a formal statement, the FOMC said, “Recent indicators suggest that economic activity has continued to expand at a solid pace. Job gains have remained strong, and the unemployment rate has remained low. Inflation has eased over the past year but remains elevated. In recent months, there has been a lack of further progress toward the Committee’s 2 percent inflation objective.”
The statement continued, saying that in support of its goals, the Committee decided to maintain the target range for the federal funds rate at 5-1/4 to 5-1/2 percent, adding, “In considering any adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks. The Committee does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2 percent.”
Meanwhile, according to a report from the California Association of realtors (CAR) this week, mortgage rates rose further last week as the latest macroeconomic report shows that the U.S. economy continued to grow moderately with inflation remaining sticky and declining slower than expected.
“Despite being in an environment where rates stay higher for longer, there are signs that suggest that housing consumers are gradually adjusting to the new normal,” said the CAR report. New home sales bouncing back in March, for example, is an indication, CAR said, that homebuyers “still want to buy if they could find a way to get back into the market.”
To that end, CAR reported that new home sales in the U.S. bounced back in March, as newly constructed single-family home sales rose 8.8% month-over-month, and surged 8.3% year-over-year.
Last month’s sales were the strongest sales pace since September 2023, said the CAR report. As interest rates rose since mid-March, more homebuyers turned to the new home market as many builders were still offering price discounts, mortgage rate buy-downs, and other incentives to offset the eroding housing affordability conditions, said CAR.
More inventory in the new home market also accounted for an increase in sales of newly constructed homes.
According to the CAR report, the supply of new homes continued to rise and reached their highest level since February 2021, with the number of housing units for sale climbing to 477,000 in March, which is an increase of 10.2% from the same month last year.
The March inventory level is equivalent to a supply of 8.3 months and remains well above the historical average of 5.9 months, said the CAR report. Meanwhile, prices for new homes in March inched up from February but declined from a year ago, while the national median price dropped 1.9% year-over-year to $430,700, according to CAR.
