fed funds futures pricing. As of late April, the financial markets indicate that there is an approximate 60% chance that the fed funds rate will be reduced by at least 25 basis points by September. However, any future interest rate cuts are subject to changing economic conditions.
Effective Federal Funds Rate January 2017 – March 2024 (Source: Federal Reserve Board)
The Housing Market It’s been difficult for anyone looking to buy a new home to be able to afford it. Rising interest rates combined with increasing home prices have made home affordability challenging. Housing prices skyrocketed between the first quarter of 2020 through the fourth quarter of 2022. The quarterly median sales price increased approximately 46%. The percentage increase in prices over those three years nearly matched the percentage increase that occurred over the entire last decade. Between the first quarter of 2010 and the fourth quarter of 2019, the quarterly median sales price increased approximately 47%. The main culprit in causing housing prices to increase significantly is the lack of inventory, which declined significantly in 2020 and has remained relatively low. The chart below shows the housing inventory (number of listings) and the median sales price for houses since January 2017. The housing inventory is indicated by the blue line (left axis); the median sales price for houses is indicated by the red line (right axis).
Housing Inventory, Number of Active Listings (blue line) Median Sales Prices of Houses Sold (red line) (Sources: Census, HUD, Realtor.com through Federal Reserve Economic Database (FRED))
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Center for Business and Economic Insight
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