Stay nimble: Smart moves for brokers when inventory grows but buyers stall

Despite calls from the administration to lower rates, the Federal Reserve announced on Wednesday that it will keep its target for the federal funds rate unchanged, holding steady at 4.25% – 4.50%. The decision, approved by a 9-2 vote, marks the fifth consecutive meeting in which the Fed has left rates steady.

In his remarks, Fed Chair Jerome Powell highlighted the number of key economic reports that will be released before the next meeting. He stressed that these data points will be critical in guiding the Fed’s next move. The next meeting is scheduled for September 16 – 17.

On a seasonally adjusted basis, home prices cooled in May for the fourth month in a row according to the Case-Shiller home price index.

Housing inventory is continuing to grow, up nearly 30% year-over-year and increasing for the 20th consecutive month. Homes in general are taking longer to sell as affordability continues to weigh on buyers.

Pending home sales, based on signed contracts, fell by 0.8% in June compared to the previous month. Pending sales fell in much of the country, including by 3.9% in the West. The Northeast was a bright spot, and activity actually picked up.

The Federal Open Market Committee recently voted to maintain its current target for the federal funds rate, with nine members favoring keeping rates steady and two voting for a cut.

This is the first time since 1993 that there have been multiple dissenting votes in a single meeting.

The Federal Reserve operates with a dual mandate: supporting stable prices and maximum sustainable employment. These mandates require striking a balance with where the Fed sets its benchmark federal funds rate.

However much a president would like lower interest rates to drive a
stronger labor market (think votes) in the short term, the Federal Reserve
was designed to manage monetary policy independently, so we as a
country would make better decisions for the long term.

Over the past few years, traders and reporters have consistently
underestimated the intestinal fortitude of the Fed to keep rates “higher for
longer,” and it seems like everyone is doing it again this month.

As always, it’s important to look beyond headlines or speculation. Waiting for the Fed’s next move isn’t enough. Staying informed and understanding these changes can help you plan and advise your clients with confidence.

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