The Housing Market’s Rebound Is No Mirage

One place where the Federal Reserve's “mid-cycle adjustment” is playing out according to script is in the housing market, which at 15% is the single-largest contributor to the U.S. economy. 

Danielle DiMartino, former advisor to the president of the Dallas Federal Reserve, writes in Bloomberg that tracking the housing market on a month-to-month basis presents a muddled picture due to fluctuating interest rates and the long period to close a purchase. But a quarterly view reveals underlying patterns with existing home sales, housing starts, and the traffic of prospective buyers index among other metrics, providing evidence that the housing market is strengthening.

Housing is the most interest-rate sensitive sector of the economy, meaning it stands to benefit more than any other from the Fed having cut its target interest rate by a half a percentage point since July. Indeed, mortgage rates have fallen by more than a percentage point over the past year in anticipation of the Fed easing, providing much needed relief to a residential real estate sector that contracted for six straight quarters through June.

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