Market Update: Are Rate Cuts on the Horizon for the Fed?

Blog posted On July 17, 2024

This morning, we got news about the housing starts and building permits from June. Though both numbers were higher than expected, the increases are largely due to multifamily building. The more hopeful news of the week came from this morning’s comments from Fed members and yesterday’s National Association of Home Builders (NAHB) housing market sentiment index.

Is builder data predicting future rate declines?

Again, we have differing stories between the overall number and the internals on the NAHB index. Overall, home builder sentiment fell to a level of 42. However, if you look at the three internal components of the index, the expectations for the next six months rose by one point to a level of 48. Experts believe that this could indicate builders see rates moderating in coming months.

The Fed is getting closer to cutting rates, but…

This morning, we also heard from Fed Governor Waller, and New York Fed President Williams. Both are influential voting members of the Fed. Here’s a breakdown of what they had to say about rates:

• Waller: Thinks recent data indicates they will be able to achieve their target inflation without causing a recession; sees a rate cut happening in September, potentially
• Williams: Believes that rate cuts will be soon, likely September

So, while a rate cut will likely be happening soon, it will probably be a couple months until it happens.

A reminder about the Fed & mortgage rates

When we talk about the Fed cutting rates, we don’t mean that it directly dictates mortgage rate movement. The rate that the Fed cuts is the benchmark interest rate. What arguably affects mortgage rate movement more is the data and economic activity that drives the Fed to raise or cut the benchmark rate.

As always, reach out if you have any questions about the market and current data.

Sources: Bloomberg, MBS Highway,  Mortgage News Daily