The National Association of Home Builders (NAHB) has urged the Fed to lower interest rates in order to improve housing affordability. The call comes after the NAHB/Wells Fargo Housing Market Index (HMI) fell to 32 in August, down from 33 in July. The reading was below the estimate of 34 and marks the lowest level since December 2022.
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“Given a slowing housing market and other recent economic data, the Fed’s monetary policy committee should return to lowering the federal funds rate, which will reduce financing costs for housing construction and indirectly help mortgage interest rates,” said NAHB Chief Economist Robert Dietz.
Housing Affordability Pressured by Fed Pause and Higher Mortgage Rates
The Fed has kept the federal funds rate steady this year after cutting it by 75 bps in 2024, citing the risk of inflation returning from President Trump’s tariffs.
At the same time, that has impacted housing affordability through higher mortgage rates. The 30-year fixed-rate mortgage is currently at 6.58%, according to Freddie Mac. That compares to rates in the upper-2% range in 2020.
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