In its mid-June policy meeting This Week in Real Estate, the Federal Reserve opted to maintain its pause on federal funds rate cuts, continuing the stance it adopted at the start of 2025. This decision follows a series of rate reductions totaling 100 basis points implemented across September, November, and December of 2024. The Fed’s current position reflects a cautious but measured approach to navigating a complex economic environment marked by persistent uncertainty and mixed signals across key sectors. “Despite elevated uncertainty, the economy is in a solid position,” stated Federal Reserve Chair Jerome Powell. “We believe that the current stance of monetary policy leaves us well positioned to respond in a timely way to potential economic developments.” The latest residential construction data from the U.S. Census Bureau revealed a notable decline in overall housing starts for May. However, single-family housing starts posted a modest gain, suggesting some resilience in that segment. Still, the broader picture remains challenging for builders, who are contending with a convergence of headwinds – including elevated mortgage rates, rising material costs due to tariffs, and ongoing economic uncertainty. These pressures contributed to a decline in builder sentiment in June, with the National Association of Home Builders reporting a two-point drop in confidence from May. This marks the third-lowest monthly reading since 2012, reflecting growing caution within the construction industry as it navigates a more constrained operating environment. In the mortgage market, the average rate for a 30-year fixed loan declined for the third consecutive week, reaching a four-week low of 6.81%. This marks a modest improvement from the previous week’s average of 6.84%, and a six-basis-point decrease from the 6.87% rate recorded at the same time last year. Below are key events from the third week of June impacting our business:
FED HOLDS KEY RATE STEADY; STILL SEES TWO MORE CUTS THIS YEAR. The Federal Reserve on Wednesday kept interest rates steady amid expectations of higher inflation and lower economic growth ahead and still pointed to two reductions later this year. The FOMC statement changed little from the May meeting. Broadly speaking, the economy grew at a “solid pace,” with “low” unemployment and “somewhat elevated” inflation, the committee said. “Uncertainty about the economic outlook has diminished but remains elevated. The Committee is attentive to the risks to both sides of its dual mandate,” the committee said. “For the time being, we are well positioned to wait to learn more about the likely course of the economy before considering any adjustments to our policies,” Powell said. Read the full story here.
SHARP DROP IN MULTIFAMILY PRODUCTION BRINGS OVERALL HOUSING STARTS DOWN. A sharp decline in multifamily production pushed overall housing starts down in May, while single-family output was essentially flat. Overall housing starts decreased 9.8% in May to a seasonally adjusted annual rate of 1.26 million units, according to a report from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau. Within this overall number, single-family starts increased 0.4% to a 924,000 seasonally adjusted annual rate and are down 7.3% compared to May 2024. On a year-to-date basis, single-family starts are down 7.1%. NAHB is forecasting that 2025 will end with a decline for single-family housing starts. The number of single-family homes currently under construction totaled 623,000 homes as of May. This is 1.3% lower than April, 7.6% lower than a year ago and 25% lower than the post-Great Recession peak level in June 2022. Overall permits decreased 2% to a 1.39-million-unit annualized rate in May. Single-family permits decreased 2.7% to an 898,000-unit rate and are down 6.4% compared to May 2024. Read the full story here.
MORTGAGE RATES HOLD STEADY. With Thursday being a federal holiday, banks (and more importantly, the underlying market for mortgage related bonds) were closed. This means that lenders were not able to update mortgage rates. It turns out that it wouldn’t have mattered either way as the average lender has barely budged from Wednesday’s levels. Over the past 3 business days, average rates have fallen 0.05%. This keeps us close to the lowest levels seen since April 4th with top tier 30yr fixed scenarios at 6.86 on the MND daily rate index. Given some of the news headlines this week, it bears repeating that this week’s Fed announcement has nothing to do with rates holding steady. In fact, even if the Fed had cut rates (which was not seen as even a remote possibility by financial markets), mortgage rates could just as easily have moved higher. Read the full story here.
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