Cutting the interest rate could boost the housing market


    The U.S. housing market just experienced its worst spring selling season in a dozen years, Bloomberg reports.

    The major question now is whether the Federal Reserve can orchestrate a soft landing that keeps the economy strong while also dropping rates enough to jump-start the stalled housing market.

    “The good news is that rates will most likely be lower next spring. The big question is why they’re lower,” says Scott Buchta, head of fixed income strategy for Brean Capital. “If rates are lower because the economy is slowing, home prices might get hit by consumer confidence. Then the question is: ‘Do I want to take a bigger mortgage? How stable am I in my job?’”

    Rates on a 30-year fixed mortgage have fallen and expectations are building that the Fed’s meeting this month could bring in even lower borrowing costs, which may ease the affordability crunch. The crunch drove average monthly sales in April through June to the lowest level for that period since 2012, according to Redfin Corp.

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