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Housing in Recovery?

March 27, 2024

 

The U.S. housing market is showing resilience as prices and homebuilder sentiment appear to have bottomed. Even with mortgage rates around 7%, demand from buyers continues to outpace the available supply of homes, which has kept the pressure on home prices. The Case-Shiller National Home Price Index grew 6.0% from a year ago January, which is the highest since November 2022.

 

The National Association of Home Builders Housing Market Index hit 51 in March, rising for the fourth consecutive month, and recording its highest reading since July 2023. Sentiment has improved largely because builders have been able to avoid cutting prices, as buyer demand remains strong amid a dwindling inventory of existing homes.  

 

While an improving housing market reinforces our view that the U.S. economy will remain resilient, it may not be good news for the Federal Reserve. Although the Fed has indicated that three rate cuts are on the horizon for 2024, an uptick in home prices could keep inflation sticky, prompting the central bank to adopt a more cautious easing cycle, which would keep rates higher for longer.    

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