First
American
senior
economist
Sam
Williamson
is
among
the
market
observers
who
say
that
the


Federal
Reserve
will
leave
benchmark
rates
unchanged
following
its
meeting
on
Wednesday.
This
would
end
a
run
of
three
straight
cuts,
totaling
100
bps,
going
back
to
December,
leaving
the
policy
rate
at
a
range
of
4.25%
to
4.5%.

The


CME
Group’s
FedWatch
tool
on
Tuesday
showed
that
99.5%
of
interest
rate
traders
are
expecting
rates
to
remain
unchanged
this
week.
There
is
debate,
however,
on
the
direction
of
policy
for
the
next
two
Fed
meetings.
About
30%
of
traders
believe
a
25-bps
cut
will
occur
in
March,
while
42%
are
predicting
one
in
May.

“With
the
economy
on
a
steady
course
and
inflation
still
elevated
but
gradually
cooling,
the
Fed
has
increasingly
adopted
a
more
cautious
path
back
toward
the
neutral
rate,”
Williamson
said
in
written
commentary.
“Policymakers
are
also
likely
awaiting
greater
clarity
around
the
potential
inflation
risks
regarding
proposed
federal
policies
before
announcing
additional
cuts.”

The
federal
policy
proposals
being
referred
to
are
President
Donald
Trump’s
expected
tariffs
on
imported
goods.
The

Trump
administration
is
reportedly
set
to
enact

25%
tariffs
on
Canada
and
Mexico
as
early
as
Saturday.
These
could
result
in
higher
levels
of
inflation
and
are
likely
to

stymie
efforts
by
homebuilders
to
ramp
up
the
pace
of
construction.

Although
mortgage
rates
have
leveled
off
in
the
immediate
aftermath
of
Trump’s
return
to
the

White
House,
it
could
be
deep
into
2025
before
borrowing
costs
drop
below
7%
or
move
closer
to
6%,
as
many

housing
prognosticators
have
called
for.

“Expectations
for
stronger
growth
going
forward,
concerns
around
inflation
reigniting,
and
policy
uncertainty
will
likely
keep
borrowing
costs
elevated
across
the
economy
to
begin
the
year,”
Williamson
said.
“Mortgage
rates
could
drift
modestly
lower
in
the
second
half
of
the
year
as
the
market
gains
more
clarity
about
the
outlook
for
monetary
policy.
Despite
this,
2025
may
still
see
modest
recovery
as
more
buyers
adapt
to
the
‘higher-for-longer’
rate
environment.”

Other
affordability
metrics
aren’t
providing
much
relief
to
prospective
homebuyers.
Prices
continued
to
rise
across
the
country
in
November,
according
to
the
latest

S&P
CoreLogic
Case-Shiller
index

released
Tuesday.
The
index
reached
an
all-time
high
for
the
18th
straight
month,
and
annualized
growth
accelerated
to
3.8%
in
November,
up
from
3.6%
in
October.
Price
gains
in
the
largest
U.S.
cities
remain
well
above
4%.

Altos
Research
data,
however,
points
to
a

potential
price
decline
for
the
upcoming
spring
purchase
season.
The
current
median
U.S.
home
price
of
$421,000
is
down
0.7%
year
over
year,
while
the
median
price
for
new
pending
sales
has
grown
by
roughly
2%
of
late.
Additionally,
Altos
founder
Mike
Simonsen
notes
that
the
share
of
listings
with
a
price
cut
has
grown
from
31%
to
33%
in
the
past
year.

“By
the
end
of
February,
we’ll
have
the
most
price
reductions
of
any
February
in
many
years,”
Simonsen
wrote
Monday.
“These
are
homes
that
are
on
the
market
now,
with
no
offers.
They’ll
take
a
price
cut
and
hopefully
get
an
offer
in
February.
That
deal
closes
in
March,
and
by
April,
you
should
be
hearing
the
headlines
that
reflect
the
weakness
we
can
see
in
the
active
market
data.”