Fed Sees Cooler Housing Market as Autumn Approaches

October 12, 2006 No Comments »

The Federal Reserve reported Thursday that the housing market had cooled substantially, with the Fed’s 12 major regions suffering soft sales, lower sales prices, and a higher stock of unsold inventory.

The Fed described the economy as “moderate or mixed”, and growth was down around 50% compared to the first quarter of the year, at just 2.6%.

The housing slowdown also dampened the once hot mortgage market, with only commercial business picking up the slack in these regions. Even with mortgage rates hovering above their lowest point for the year, buyers simply aren’t biting with home prices still at near-all time highs.

The Wednesday Fed minutes revealed that the concern for inflation remained high which signaled that the Federal funds rate would likely not come down October 24th when they meet to decide on their direction.

The cooler housing sector has clearly slowed down economic growth, but until inflation is found to be in complete control, we will probably see interest rates unchanged.

The good news is things seem to be on track for a drop in interest rates in mid-2007, and a possible housing boom in 2008.

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