Favorable Appreciation Forecast, Fed Minutes Show Division

Forecasts for home prices remain favorable, while the Fed minutes point to internal division over the next steps for interest rates. Read on for more key takeaways.

·       Why Homeownership Remains a Smart Investment

·       Fed Minutes Reveal Deep Divide

·       Retail Sales Cool in September, But Annual Gains Hold Strong

Why Homeownership Remains a Smart Investment

According to Cotality’s latest Home Price Insights report, home values declined by just 0.3% in August. However, they were still up 1.3% year-over-year – a slight slowdown from July’s 1.4% annual growth.

Meanwhile, ICE’s data for September showed a 0.17% monthly increase in home prices (seasonally adjusted), with a 1.2% annual gain – up from 1% in August. This marked the first acceleration in home price appreciation in eight months, signaling renewed strength in the market.

What’s the bottom line? Home prices are always driven by supply and demand, and both sides are currently contributing to market strength.

On the demand side, falling mortgage rates have helped improve affordability to the best levels in 2.5 years, according to ICE. This has brought more buyers back into the market, as seen in the uptick in contract signings for both new and existing homes, as well as increased mortgage application activity. Many of these buyers represent pent-up demand that had been waiting for more favorable conditions.

On the supply side, inventory is tightening. ICE has reported a decline in new listings along with an increase in sellers pulling their homes off the market. With more buyers entering and fewer homes available, these conditions are putting upward pressure on prices.

Looking ahead, Cotality forecasts a 3.9% increase in home values over the next 12 months. This outlook likely reflects expectations for continued lower rates, strong underlying demand, and tighter inventory levels heading into the fall and winter.

Real estate remains one of the most reliable ways to build long-term wealth. For example, a $500,000 home appreciating at 4% annually would gain $20,000 in just one year – underscoring the strong return potential of homeownership.

Fed Minutes Reveal Deep Divide

Minutes from the Fed’s September 17 meeting highlight differing views among officials on the direction of interest rates, the pace of inflation, and the strength of the labor market.

At that meeting, the Fed delivered a widely expected 25-basis-point rate cut – its first of the year – after holding rates steady through its previous five meetings. The move reflects the Fed's ongoing effort to balance persistent inflation with growing concerns about a weakening labor market.

Reminder: The Fed Funds Rate is what banks charge each other for overnight loans. While it doesn’t directly set mortgage rates, it influences borrowing costs across the economy.

What’s the bottom line? The Fed is navigating a tough balancing act: inflation remains above target, but economic momentum is clearly slowing. High inflation limits the Fed’s ability to cut rates, while signs of softness – especially in jobs – may prompt more action.

Chair Jerome Powell underscored the complexity, saying there’s “no risk-free path” as the Fed weighs its next move.

Complicating matters further, the government shutdown has delayed key inflation and employment reports the Fed typically relies on – leaving policymakers with less data and even less consensus heading into the next meeting on October 29.

Retail Sales Cool in September, But Annual Gains Hold Strong

After two strong months of back-to-school spending, retail sales slowed in September compared to August, according to the National Retail Federation (NRF). Month over month, five of nine retail categories saw declines. Still, year-over-year growth remained solid, with all but one category posting gains – led by online sales, sporting goods and apparel.

What’s the bottom line? The Fed closely monitors consumer spending as a key indicator of economic strength. With the government’s official retail sales report likely delayed by the recent shutdown, the NRF’s figures may carry added weight as the Fed prepares for its next policy meeting.

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