Much to the relief of potential home buyers, credit card holders and car buyers, the Federal Open Market Committee (FOMC) voted to lower the Federal-funds rate by half a percentage point on Wednesday.
It is the first such rate cut in four years.
“This decision reflects our growing confidence that with an appropriate recalibration of our policy stance, strength in the labor market can be maintained in a context of moderate growth and inflation moving sustainably down to 2%,” Fed Chair Jerome Powell said.
Calling the reduced rate a “recalibration,” Powell said he does not see an economic downturn as any more likely because of the cut.
Said Powell, “I don’t see anything in the economy right now that suggests that the likelihood of a recession, sorry, of a downturn, is elevated.”
“You see growth at a solid rate,” Powell continued. “You see inflation coming down. You see a labor market that’s still at very solid levels. So, I don’t really see that now.”
In a statement, the FOMC said, “In light of the progress on inflation and the balance of risks, the Committee decided to lower the target range for the federal funds rate by 1/2 percentage point to 4-3/4 to 5 percent. In considering additional adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks.
Keeping a close eye on the economic effects of the cut, the statement added, “The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee’s goals. The Committee’s assessments will take into account a wide range of information, including readings on labor market conditions, inflation pressures and inflation expectations, and financial and international developments.”
At the same time, according to a report this week from the California Association of Realtors (CAR), “a tepid increase in food prices and another moderation in energy prices kept inflation in check last month.”
The August headline Consumer Price Index (CPI) increased 0.2% from the prior month and was up 2.5% from the same month last year, in line with consensus expectations.
According to the Bureau of Labor Statistics, the Consumer Price Index for All Urban Consumers (CPI-U) increased 0.2 percent on a seasonally adjusted basis, the same increase as in July, the U.S. Over the last 12 months, the all items index increased 2.5 percent before seasonal adjustment.
The index for shelter rose 0.5 percent in August and was the main factor in the all items increase. The food index increased 0.1 percent in August, after rising 0.2 percent in July. The index for food away from home rose 0.3 percent over the month, while the index for food at home was unchanged.
The energy index fell 0.8 percent over the month, after being unchanged the preceding month.
The index for all items less food and energy rose 0.3 percent in August, after rising 0.2 percent the preceding month. Indexes which increased in August include shelter, airline fares, motor vehicle insurance, education, and apparel. The indexes for used cars and trucks, household furnishings and
operations, medical care, communication, and recreation were among those that decreased over the month.
The all items index rose 2.5 percent for the 12 months ending August, the smallest 12-month increase since February 2021, while the energy index decreased 4.0 percent for the 12 months ending August.
Homeowner equity increased with a solid pace on an annual basis in Q2 2024 as home prices remained on an upward trend in the past 12 months, according to the latest CoreLogic Homeowner Equity Insights.
In a 8.0% year-over-year surge, reported CoreLogic, homeowners with mortgages in the U.S. have seen an aggregated increase of $1.3 trillion in equity since Q2 2023. Mortgaged residential properties with negative equity declined 4.2% from Q1 2024 and 15.0% from Q1 2023. Roughly 1.7%, or 960k, of all mortgaged properties were underwater, which was significantly below the peak of 26% observed in Q4 2009.
On average, said CoreLogic, U.S. homeowners with mortgages gained $25,000 in equity last quarter compared to a year ago. California had the second-highest equity gain of all states in Q2 2024, with an average homeowner equity increase of $55,000 year-over-year in the latest quarter. The share of homes with negative equity in California remained unchanged at 0.7% in Q2 2024 and was one of the three states reported by CoreLogic with less than 1% negative equity share.
In addition, according to the latest CoreLogic Homeowner Equity Insights, homeowner equity increased with a solid pace on an annual basis in Q2 2024 as home prices remained on an upward trend in the past 12 months,
“Homeowners with mortgages in the U.S. have seen an aggregated increase of $1.3 trillion in equity since Q2 2023, a surge of 8.0% year-over-year,” said CoreLogic.
At the same time, mortgaged residential properties with negative equity declined 4.2% from Q1 2024 and 15.0% from Q1 2023. Roughly 1.7%, or 960k, of all mortgaged properties were underwater, which was significantly below the peak of 26% observed in Q4 2009.
On average, said CoreLogic, U.S. homeowners with mortgages gained $25,000 in equity last quarter compared to a year ago. California had the second-highest equity gain of all states in Q2 2024, with an average homeowner equity increase of $55,000 year-over-year in the latest quarter.
The share of homes with negative equity in California remained unchanged at 0.7% in Q2 2024 and was one of the three states reported by CoreLogic with less than 1% negative equity share
