What you need to know about the Fed's Interest Policies
Over the last three quarters, mortgage interest rates have declined from late-2018 cycles and it's due to the evolution of the central bank's policy. The Federal Reserve reduced the short-term federal funds rate to a top rate of 2.25%.
With that being said, other rate cuts may not be guaranteed. The NAHB believes that investors will be too aggressive about the rate reduction in the next few quarters. In the overall economy, the Fed characterized the labor market as "strong," with a "moderate" rate of economic activity rising.
Housing still faces affordability issues with a 10-year low last fall, but the actions by the Fed will help reduce borrowing costs. They foresee a positive future for housing demand and construction, while still being able to offer an offset for rising construction costs.
There are healthy debates among the Federal Open Market Committee regarding two announcements that they made. In the current macroeconomic state, issues such as trade concerns, slowing global growth, tight U.S. labor market, and an undershot for inflation are of concern. The Fed announced that it'd be ending the balance sheet runoff program this month — that specific policy has been in place since October 2017. There is a desirable stance that the central bank controls the money supply based upon that policy. Hopefully, in the years to come, housing affordability will increase while the mortgage rates continue to decrease.