July 31, 2018
Though August is usually a pretty slow month within the financial markets and the real estate sector, this August starts with a bang. Today the Federal Reserve’s Open Market Committee concludes their meeting and will issue their rate decision and analysis. Just two weeks ago, Federal Reserve Chairman Jerome Powell told Congress that strong U.S. economic growth and stable inflation should keep the central bank on track to gradually raise short-term interest rates. With an increase in June, most are not predicting another hike this quickly. Thus, any move to hike rates would be a surprise.
Powell also spoke about the risks to the economy of higher tariffs. There is some debate as to whether these tariffs will affect the economy in the short-run. The release of the jobs report on Friday is expected to show continued strength within the labor market despite the threat of trade wars. As always, the Fed will be focused upon wage growth as an indicator of the threat of inflationary pressures. Thus far, general inflation has ticked up, but not enough to alarm the Fed or market analysts.
One area in which we have seen some weakness in the economy has been existing home sales. Over the past year, the pace of existing home sales has dropped and is no longer growing over the past two years. While higher prices and rates are certainly factors, potential demand is being held back by a lack of inventory. This is why new home sales have fared a bit better this year — increasing supply. It remains to be seen if home sales will pick up further this fall so that the real estate sector can be a positive factor in overall economic growth as 2018 comes to a close.
Source: Origination Pro
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