The Federal Reserve's monetary policy committee raised the federal funds target rate by 25 basis points, moving it to an upper rate of 5%, to balance the risks of ongoing elevated inflation and emerging risks to the banking system. However, the Fed's communication has shifted to a more data-dependent mode as it anticipates some additional policy firming to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2% over time. The Fed's new summary of economic projections also indicates only 0.4% GDP growth in 2023 and just 1.2% for 2024, with a projected top federal funds rate of 5.1% for 2023 and then falling as the Fed eases to 4.3% to 2024 and 3.1% in 2025.

 

The National Association of Home Builders (NAHB) is monitoring lending conditions via industry surveys and expects tighter conditions as the Fed balances the risks of inflation and risks to the banking system. The NAHB also expects that the top interest rates for mortgages were experienced last October and predicts that mortgage rates will trend lower from current levels later in 2023. They believe that the health of the regional and community bank system is critical to the availability of builder and developer financing, for for-sale, for-rent, and affordable housing construction.

For landscape architects, these changes in monetary policy will have implications for the availability of builder and developer financing, as tighter credit conditions for households and businesses may slow the economy and reduce inflation. However, the Fed's projected easing from 2024 through 2026 suggests a good runway for home building growth during the second half of the 2020s, a period of time when the structural housing deficit will be reduced. Landscape architects working on housing projects should therefore continue to monitor lending conditions and be aware of possible sales of mortgage-backed securities by some smaller banks, which may increase the spread between the 10-year Treasury rate and the typical 30-year fixed rate mortgage.

https://eyeonhousing.org/2023/03/the-fed-raises-again-but-takes-a-more-dovish-tone/