By Vincent Salandro | Builder
All signals indicate the Federal Reserve Open Market Committee will cut rates at its September meeting after eight consecutive rate pauses. With the unemployment rate rising to 4.3% in July and inflation levels measuring less than a percentage point above the Fed’s long-term target of 2%, economic conditions and Fed messaging suggest rate cuts will begin in September, with an additional cut likely in December.
“The bond market is virtually pricing a 100% chance of [a September rate cut], so investors believe it is coming. We think it is likely we will see another rate cut in December, and both of those are expected to be 25-basis-point (bp) [cuts],” says NAHB chief economist Rob Dietz. “We are seeing an economy that is cooling and slowing, but otherwise showing solid signs despite elevated rates.”
For builders and multifamily developers, Dietz says the Fed rate cuts will have an impact on business lending conditions through Acquisition, Development & Construction (AD&C) loans and indirect impacts on long-term interest rates.
