Housing market set for short-term volatility
The Federal Reserve kept its benchmark interest rate unchanged on Wednesday, maintaining the current range of 4.25% to 4.50%.
The decision, which was widely anticipated, marks the second consecutive meeting without a rate adjustment following three cuts in 2024.
Fed Chair Jerome Powell recently signalled a cautious approach to monetary policy, stressing the need for clearer economic data before making further adjustments.
While financial markets had expected the hold, concerns remain over slowing economic growth, persistent inflation, and potential policy shifts under the Trump administration, particularly regarding tariffs. The Fed’s preferred inflation measure, which excludes food and energy, currently stands at 3.1%, above its 2% target.
Tim Lawlor, chief financial officer at mortgage lender Kiavi, attributed the Fed’s decision to ongoing economic uncertainty and the possible impact of future policies.
“In terms of the housing market more specifically, we expect some short-term volatility over the next six to nine months but anticipate the market will stabilize over the next 18 months as the Fed provides more clarity around its interest rate policy for the remainder of 2025,” Lawlor said.
He noted that factors such as potential tariffs and labor shortages are driving up real estate development costs, creating challenges for the sector. While some housing markets, including Texas and Florida, are showing signs of softening, regions in the Midwest and Northeast are performing more steadily.
“Real estate investors should also be cautious of the markets showcasing increasing days on the market for home sales,” Lawlor added. “Real estate investing is based on a margin of safety: buy at the right price, have exit options, and stay in tune with local trends.”
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