Rate
cuts
still
on
the
board

One
of
the
more
controversial
actions
that
came
out
of
this
week’s
FOMC
meeting
was
tied
to
its
Summary
of
Economic
Projections
(SEP).
Most
Fed
policymakers
still
expect
at
least
two
interest
rate
cuts
this
year,
although
that
number
shrank
compared
to
the
previous
SEP
that
was
released
in
December.

But
expectations
for
gross
domestic
product
(GDP)
growth
in
2025
were
pared
back,
with
the
median
estimate
from
Fed
officials
dropping
from
2.1%
in
December
to
1.7%
in
March.
And
the
median
estimate
for
the
Personal
Consumption
Expenditures
(PCE)
index
—
the
Fed’s
preferred
inflation
gauge
—
rose
from
2.5%
to
2.7%.

Powell
said
these
forecasts
are
rooted
in
“really
high
uncertainty.”

“What
would
you
write
down?
It’s
really
hard
to
know
how
this
is
going
to
work
out,”
he
said.
“We
think
our
policy
is
in
a
good
place.
We
think
it’s
in
a
good
place
where
we
can
move
in
the
direction
we
need
to.
But
in
the
meantime,
it’s
really
appropriate
to
wait
for
further
clarity.”

‘No
rush
to
ease
policy’

Those
might
not
be
comforting
words
to
housing
professionals
whose
businesses
have
been
decimated
by
the
post-pandemic
jolt
to
inflation
and
the
Fed’s
resulting
interest
rate
hikes.

Residential
mortgage
origination
volume
plummeted
from
$1.22
trillion
in
the
second
quarter
of
2021
to
$323.53
billion
in
the
first
quarter
of
2023,
according
to
data
from
the

Federal
Reserve
Bank
of
New
York.
The
mortgage
market
has
recovered
only
a
fraction
of
that
lost
volume
since
then.

Emanuel
Santa-Donato,
senior
vice
president
and
chief
market
analyst
at

Tomo
Mortgage,
indicated
there
were
no
surprises
in
the
Fed’s
actions
this
week.

“The
new
SEP
confirms
what
markets
expected
—
rate
cuts
are
coming,
but
don’t
expect
them
to
be
fast
or
aggressive,”
he
said
in
written
commentary.
“The
Fed’s
latest
forecast
suggests
only
two
cuts
this
year,
reinforcing
that
Powell
is
in
no
rush
to
ease
policy.

“With
inflation
expected
to
settle
at
2.7%
and
unemployment
ticking
up
to
4.4%,
the
Fed
sees
some
room
to
cut,
but
the
message
is
clear:
Any
relief
from
the
Fed
will
be
slow
and
measured.” 

Mortgage
rates
remain
a
major
impediment
for
prospective
homebuyers
even
as
the
average
30-year
rate
has
dropped
from
a
recent
high
point
of
7.87%
in
October
2023
to
6.80%
this
week,
according
to


HousingWire’s
Mortgage
Rates
Center.

Rob
Cook,
a
Chicago-based
vice
president
at

Discover
Home
Loans,
said
that
even
though
rates
are
near
their
historic
average,
consumers
remain
psychologically
unattracted
to
them
because
of
“the
historic
low
rates
observed
during
the
pandemic.”

“Most
homeowners
who
had
mortgages
took
advantage
of

refinancing
at
those
low
rates,”
Cook
told
HousingWire.
“This
has
greatly
reduced
the
supply
of
houses
on
the
market,
as
existing
homeowners
are
reluctant
to
move
and
thereby
replace
their
current
low
mortgage
rates
with
today’s
higher
rates.”

He
also
indicated
that
the
Fed’s
forecast
for
rate
cuts
this
year
isn’t
out
of
line
if
key
trends
materialize.

“While
many
factors
affect
mortgage
rates,
economic
data
on
inflation
and
employment
are
always
worth
paying
attention
to
as
they
influence
future
Fed
policy,”
Cook
said.
“As
the
Fed
gains
confidence
that
inflation
is
under
control
and/or
see
signs
that
the

job
market
is
softening,
that
would
make
it
more
likely
for
the
Fed
to
cut
rates.”

Tariff
deadline
on
the
horizon

April
2
is
looming
as
a
key
date
for
the
global
economy.
That’s
when
Trump’s

reciprocal
tariffs
are
set
to
go
into
effect.
These
duties
would
see
the
U.S.
match
every
tariff
placed
on
its
exported
goods
by
every
other
country.
If
they
go
through,
they
could
cause
chaos
across
various
industries,
including
the

homebuilding
sector.

A

report
this
week
in
The
Wall
Street
Journal
indicated
that
the
Trump
administration
has
explored
an
alternative
to
the
universal
tariffs.
The
plan
would
separate
other
nations
into
three
tiers
and
charged
them
different
rates.
But
that
option
was
reportedly
scrapped
in
favor
of
an
individualized
approach
to
each
trade
partner.

“The
president
has
made
it
clear
he
wants
to
see
true
reciprocity
across
the
board
from
every
one
of
our
trading
partners,
and
many
ideas
have
been
discussed
on
how
to
best
achieve
that
outcome,”
White
House
press
secretary Karoline
Leavitt told
the
outlet.

While
tariffs
and
rising
inflation
could
fuel
job
losses
and
a
recession,
a
downturn
might
not
spell
doom
for
home
sales.
Odeta
Kushi,
deputy
chief
economist
at

First
American
Financial
Corp.,
wrote
earlier
this
week
that
the
Fed
typically
responds
to
a
slowing
economy
by
lowering
interest
rates.

That
could
spur
more
homebuyers
to
come
off
the
sidelines.
But
Santa-Donato
cautioned
that
this
could
mean
higher
home
prices
if

bidding
wars
become
more
common.

“The
SEP
confirms
that
the
Fed
sees
a
slower-growth
economy
ahead,
but

home
prices
won’t
necessarily
follow
that
same
trajectory,”
Santa-Donato
said.
“If
rates
do
drop
meaningfully,
competition
will
pick
up,
and
in
a
market
with
limited
supply,
affordability
may
not
improve
as
much
as
buyers
hope.

“Buyers
hoping
for
affordability
relief
might
be
disappointed
—
lower
rates
won’t
necessarily
mean
cheaper
homes
in
this
supply-constrained
market.”

Powell
acknowledged
that
recent
surveys
of
households
and
businesses
reveal
a
“significant
rise
in
uncertainty.”
Fed
officials,
he
said,
will
need
more
time
to
see
whether
this
pessimism
translates
to
changes
in
consumer
behavior.

“The
relationship
between
survey
data
and
actual
economic
activity
hasn’t
been
very
tight,”
he
said.
“There
have
been
plenty
of
times
where
people
are
saying
very
downbeat
things
about
the
economy
and
then
going
out
and
buying
a
new
car.
But
we
don’t
know
that
that
will
be
the
case
here.”