It's Fed week! The Fed kicks off its two-day Federal Open Market Committee meeting tomorrow and will end on Wednesday at 2:00 p.m. ET with the monetary policy statement and a projection of economic indicators. The Fed's Powell will hold a press conference at 2:30. The Fed is expected to hike the short-term Fed Funds Rate by 0.25% to 2.75%. The key headlines will be derived from the monetary policy statement, which may reveal the path of interest rate movements for 2019.
Home builder confidence slipped in December to its lowest level since May 2019 due in part to affordability issues. The NAHB Housing Market Index fell to 56 in December, down from 60 in November. Within the report, it showed that current sales conditions, expectations and buyer traffic all declined. NAHB Chief Economist Robert Dietz says, “This housing slowdown is an early indicator of economic softening, and it is important that builders manage supply-side costs to keep home prices competitive for buyers at different price points.”
Fannie Mae predicts that the housing market is expected to stabilize in 2019 as economic growth slows. Fannie Mae released its released its December Economic Outlook revealing that it sees Gross Domestic Product averaging 3.1% in 2018 before slowing to 2.3% in 2019 and 1.6% in 2020. The labor market will continue to be a strong point this and into 2019. Doug Duncan Fannie Mae's chief economist says, "If mortgage rates trend sideways next year, as we anticipate, and home price appreciation continues to moderate, improving affordability should breathe some life into the housing market. We also expect residential fixed investment to resume a positive growth trajectory amid continued rising housing starts and stabilizing home sales. However, affordability is likely to remain an industry concern, particularly among first-time homebuyers.”