By Warren Shoulberg, IWF News
The one-half-point cut was larger than many predicted, triggering positive signs for the building and construction trade.
It took longer – far longer – than many of the experts predicted and just about everybody in the building trade was hoping for but the Federal Reserve finally reduced interest rates earlier this month and they went all-in, putting through a half-point cut rather than the less aggressive quarter-point some had forecast.
Leading up to the announcement and in the days thereafter we’re already seeing the impact of the lower rates for the all-important housing market. Leading the way is the ongoing reduction of mortgage rates, which many say will continue to come down in the months ahead. Mortgages had been as high as 7.79 percent 11 months ago and had only just begun falling below the 7 percent mark earlier this year.
Now, the average interest rate for a 30-year fixed mortgage is 6.09 percent, a drop from 6.2 percent just the week before. Sam Khater, chief economist at the federal mortgage agency Freddie Mac, told The New York Times the cut is “reviving purchase and refinance demand for many consumers” and he expected “rates to fall further, sparking more housing activity.”
The country is already seeing positive signs in housing although the month-to-month results remain inconsistent. Earlier this summer home sales went up 1.3 percent, the first increase in more than five months. That rise did not continue in August but when the September numbers are released there could be good news again.
And as Freddie Mac’s Khater said, these lower interest rates will also make refinancing a better prospect for current homeowners staying where they are. Often, the proceeds of refinancing deals are put towards home improvement and remodeling projects.
Finally, lower interest rates will be advantageous in the cost of financing materials for builders and others in the construction trade. With the cost of money coming down the savings are likely to help the bottom lines of those in the business.
Make no mistake, interest rates are still high – more than double from just a few years ago during the pandemic-fueled housing boom – but they are now heading back in the right direction.
Finally.