Interest rates might be heading south, but the prices of homes listed for sale are heading north. Realtor.com said that home prices reached a record median value of $300,000 during the month of March.
It’s a trend that could likely persist, according to Danielle Hale, realtor.com’s chief economist.
“Despite a slowing growth rate, home prices will likely continue to set new records later this year,” said Hale. “Heading into spring, U.S. prices are expected to continue to rise and inventory is expected to continue to increase, but at a slower pace than we’ve seen the last few months as fewer sellers want to contend with this year’s more challenging conditions.”
Home values surged from 2016 to the middle of 2018, but was accompanied by a rise in interest rates as the Federal Reserve instituted four rate hikes through 2018. In move that was widely anticipated by most market experts, the Fed last week elected to keep rates unchanged, holding its policy rate in a range between 2.25 percent and 2.5 percent.
In addition, the central bank alluded to no more rate hikes for the rest of 2019 after initially forecasting two. Following last month’s Fed decision, mortgage rates took a dip.
“The U.S. economy is in a good place,” said Fed Chair Jerome Powell. “We will continue to use our monetary policy tools to help keep it there. The jobs market is strong, showing healthier wage gains and prompting many people to join or remain in the workforce. The unemployment rate is near historic lows and inflation remains near our 2 percent goal.”
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Lower mortgage rates could give the housing market a much needed boost, which could translate to more strength for the housing market. Rising rates, low affordability and rising homebuilder costs due to tariffs have been thorns in the side for the housing market.
“During the first two months of the year, home-price growth continued to decelerate. This is the opposite of what we saw the last two years when price growth accelerated early,” said Frank Nothaft, chief economist at CoreLogic. “With the Federal Reserve’s announcement to keep short-term interest rates where they are for the rest of the year, we expect mortgage rates to remain low and be a boost for the spring buying season. A strong buying season could lead to a pickup in home-price growth later this year.”
Exchange-traded fund (ETF) investors looking into the real estate space can use funds like the Vanguard Real Estate ETF (NYSEArca: VNQ). VNQ was down a paltry 0.16 percent, but up 17.44 percent for the year.
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