To hardly anyone’s surprise, the Federal Open Market Committee (FOMC) ended its March meeting with a unanimous vote to raise the fed funds rate. Citing expectations that “economic activity will expand at a moderate pace in the medium term and labor market conditions will remain strong,” the group raised the target range for the sixth time since the start of the financial crisis. Their action will put the rate at around 1.63%, the highest since September 2008.
People who understand such things used a magnifying glass and a divining rod to wade through the FOMC statement. Most agree the members are planning at least two more increases this year.
Building, Selling Stats
Residential construction started the new year out strong after a weak finish to the old one. The resurgence didn’t last. Two of the three February measures, permits issued and housing starts, were down, and down much more than analysts had predicted, 5.7% and 7.0% respectively. Only housing completions showed any real strength, up 7.8% for the month and running 13.6% higher than last year.
February’s sales of existing homes did exactly the opposite. The National Association of Realtors (NAR) posted the first positive report on existing home sales in three months. Transactions rose 3.0% from January and single-family home sales were even stronger, besting the January pace by 4.2%.
Full disclosure however; sales were awful in the Northeast, mediocre in the Midwest, and only slightly positive in the South. This left the West carrying the load. Sales in that region were up 11.4% to an annual rate of 1.27 million units, 2.4% higher than a year earlier.
At a press conference before the release of the report, NAR’s chief economist Lawrence Yun bemoaned the state of condo construction. Condo sales dived by 6.5% from January and are lagging last year by 4.9% as inventories remain slim. Yun complained that while multifamily construction has been strong, it has focused on the rental market. Builders aren’t building condos, he said, and those are needed now to help first-time buyers transition into homeownership.
And speaking of homeownership, Generation Z isn’t waiting for Millennials to get out of the way. MarketWatch reports that its members, the oldest of whom is 23, already own about 100,000 homes. They appear ready for the challenge; their mortgage delinquency rates are well below those of all the older age groups.