The
higher-for-longer
rate
environment
appears
to
be

taking
a
toll
on
the
market
for
new
homes,
which
had
been
outperforming
the
existing-home
market
for
some
time.

Following
last
week’s
release
of
the

homebuilder
confidence
survey
from
the

National
Association
of
Home
Builders
(NAHB),

Cotality
chief
economist
Selma
Hepp
said
that
the
rising
inventory
of
existing
homes
for
sale
is
likely
to
keep
new
construction
activity
in
check.

“In
response
to
a
lackluster
spring
home-buying
season
and
subdued
demand
projections,
builders
are
adjusting
their
new
construction
plans
accordingly,”
Hepp
said
in
written
commentary.
“Additionally,
increasing
inventories
of
existing
homes
for
sale
in
several
major
new
construction
markets
may
further
reduce
the
need
for
additional
housing
development
at
this
time.

“Beyond
the
continued
use
of
incentives
to
attract
buyers,
builders
are
also
contending
with
rising
costs
resulting
from

tariffs
affecting
steel,
metal,
windows,
floor
coverings,
and
appliances.”

Waller
calls
for
cut

The

Federal
Reserve
will
hold
its
next
meeting
on
July
29-30.
And
while
the
likelihood
of
a
rate
cut
is
low,
at
least
one
member
of
the

Federal
Open
Market
Committee
(FOMC)
is
advocating
for
one.

Last
week
at
New
York
University,
Fed
Gov.
Christopher
Waller
gave
a
speech
titled,

“The
Case
for
Cutting
Now,”
in
which
he
argued
for
a
25-basis-point
cut
to
benchmark
rates
this
month.
The
central
bank
hasn’t
lowered
rates
from
their
current
range
of
4.25%
to
4.5%

since
December.

Waller
said
that
tariffs
are
“one-off
increases
in
the
price
level
and
do
not
cause
inflation
beyond
a
temporary
surge.”
Standard
practice
calls
for
looking
past
these
short-term
impacts
when
long-term
inflation
estimates
are
well
anchored
—
and
Waller
says
they
are.

He
went
on
to
say
that
economic
data
illustrates
the
case
for
a
more
neutral
monetary
policy
stance.
Gross
domestic
product
(GDP)
growth
is
soft
and
running
lower
than
the
FOMC’s
long-term
projections,
the
unemployment
rate
is
relatively
low
at
4.1%,
and
headline
inflation
is
“close
to
our
target”
if
temporary
tariff
impacts
are
ignored,
Waller
said.

“Taken
together,
the
data
imply
the
policy
rate
should
be
around
neutral,
which
the
median
of
FOMC
participants
estimates
is
3
percent,
and
not
where
we
are
—
1.25
to
1.50
percentage
points
above
3
percent,”
he
said.

While
inflation
has
gradually
slowed
since
peaking
at
a
40-year
high
point
in
mid-2022,
it
has
picked
up
more
recently.
The
Consumer
Price
Index
(CPI)
for
June
showed
prices

rising
2.7%
year
over
year,
30
basis
points
higher
than
the
gain
in
May.

Meanwhile,
employers
continue
to

defy
expectations
by
adding
jobs.
In
June,
they
created
147,000
new
jobs,
higher
than
the
figure
of
139,000
in
May.
HousingWire
Lead
Analyst
Logan
Mohtashami

noted
the
irony
that
recent
cuts
to
the
federal
workforce
under
the
Trump
administration
have
led
to
a
surge
in
state
government
jobs.

“This
jobs
report
has
something
for
everyone,”
Mohtashami
wrote.
“For
me,
it’s
the
same
ongoing
trend:
although
the
labor
market
is
becoming
softer,
it
is
not
completely
breaking.
Notably,
we
saw
losses
in
manufacturing
and
residential

construction
jobs,
while
government
employment
increased
significantly.”

‘Monetary
policy
needs
to
hold
tight’

Waller’s
push
for
a
rate
cut
isn’t
likely
to
materialize.
Despite

heavy
criticism
from
the
Trump
camp,
Fed
Chair
Jerome
Powell
hasn’t
wavered
from
his

“wait-and-see”
stance,
positing
that
tariff-driven
inflation
is
a
larger
concern.

Lorie
Logan,
the
president
of
the

Federal
Reserve
Bank
of
Dallas,

spoke
publicly
last
week
in
San
Antonio
about
monetary
policy.
While
Logan
is
not
a
current
voting
member
of
the
FOMC,
her
opinions
are
likely
shared
by
some
committee
members.

“Fiscal
policy
appears
set
to
be
a
tailwind
to
aggregate
growth,
although
the
effects
will
vary
across
income
levels
and
economic
sectors,”
Logan
said.
“While
consumer
spending
has
stepped
down
from
last
year’s
very
strong
pace,
the
solid
labor
market
means
household
incomes
are
holding
up.

“All
this
adds
up,
for
me,
to
a
base
case
in
which
monetary
policy
needs
to
hold
tight
for
a
while
longer
to
bring
inflation
sustainably
back
to
target
—
and
in
this
base
case,
we
can
sustain
maximum
employment
even
with
modestly
restrictive
policy.”

Additionally,
the


CME
Group’s
FedWatch
tool
continues
to
show
that
interest
rate
traders
are
betting
heavily
on
the
status
quo,
with
95%
saying
that
rates
will
remain
unchanged
in
July.
But
roughly
60%
are
predicting
one
in
September.