Record-low mortgage rates and shortage of inventory are keeping the US housing market strong as far as demand is considered. Home prices have been surging month-over-month breaking new records. While affordability issues worsen, low mortgage rates, growing savings, and a strengthening job market combine to keep homeownership within reach for many potential buyers. But will the housing market eventually crash? Let’s look at the most recent trends and housing market predictions for 2021 and 2022.
This year’s housing market has been exceptionally strong, with strong housing demand in virtually every region of the country. In the midst of this pandemic, the housing market has emerged as a boon for sellers and a cause of concern for buyers. For several years, home prices have been growing in the mid-single digits. The recent price increases in the double digits reflect the confluence of extraordinary demand and persistently low supply. Prices are rising as there is plenty of capital on the sidelines, as well as very cheap mortgage rates.
A strengthening economy and millennials nearing their peak homebuying years are fueling a residential housing boom. Due to millennial homeownership and other reasons such as growing construction costs and real-estate investors scooping up starter houses, housing supply is presently at its lowest level since the 1970s. Low mortgage rates, combined with an increase in work-from-home opportunities as a result of the pandemic, have also fueled a surge in housing demand, particularly in lower-density suburbs.
We’ll look at current real estate trends, price and rent hikes, housing sales and supply, mortgage rates and delinquencies, and other significant industry takeaways and insights into the US housing market.
What Happens Next in the Housing Market?
Pending home sales, a leading indicator of the health of the housing market, fell 1.8% in July, the second straight month of declines amid a record-breaking surge in housing prices. The National Association of Realtors’ (NAR) Pending Home Sales Index, which tracks the number of homes that are under contract to be sold, dropped 1.8% in July from the previous month. All four regions of the U.S. reported a year-over-year decline in pending home sales, which is an indicator of home sales that are likely to take place in one to two months.
The only region to post an increase in sales from a month ago was the West, where pending sales rose 1.9% in July from June. But sales in the West are down 5.7% compared to a year ago. Pending sales in the Northeast region recorded a 6.6% and 16.9% decrease — the largest monthly and year-over-year decline, respectively, since the data has been tracked. If home sales continue to fall, sellers may be forced to lower their prices and give buyers more time and flexibility when purchasing homes.
Realtor.com®’s national housing trends for July show evidence of a positive shift in the market for homebuyers. Median listing prices in several metro areas are continuing to fall, owing to an increase in lower-priced houses. New sellers are entering the market at near-normal levels, and while property prices remain high, they may need to consider pricing more competitively in the near future. The nationwide median listing price for active listings in July was $385,000, up 10.3 percent from the previous year.
The annual price growth rate has slowed for the third month in a row. The annual median home price growth rate in June was 12.7 percent, down from 15.2 percent in May. In comparison to previous year, large metros witnessed an average price increase of 3.9 percent. Price rise in the country’s major metros is slowing somewhat quicker than in the rest of the country.
While median listing price growth is slowing, this does not represent a housing market crash, but rather a shift in the mix of inventory offered for sale this month versus last year. Total houses for sale on the market in July were 606,086, which is still 305,000 fewer homes actively for sale on a typical day in July compared to the previous year. In July, newly listed homes grew by 6.5% on a year-over-year basis, and remained stable on a month-over-month basis.
These newly listed properties are mostly smaller in size than last year, moving the inventory balance toward smaller homes in comparison to previous year. For homebuyers, this implies that, depending on their metro region, there may be more cheap inventory available. The decline in time-on-market has slowed but homes are still being picked up rapidly as demand remains high. The time a typical listing spends on the market is beginning to correspond to seasonal patterns.
As the number of newly listed properties is increasing, the sharp inventory losses of recent months have moderated. The net result has been a deceleration in the growth of listing prices. While home prices are still rising at a double-digit rate, they have passed their peak growth rates. All these market trends point to a positive development for buyers as we enter the second half of this year.
CoreLogic, a data and analytics company, projects home price gains may slow over the next 12 months as demand moderates and for-sale inventory rises. The CoreLogic HPI Forecast indicates that home prices will increase by 3.2% from June 2021 to June 2022. The HPI Forecast also reveals the continued disparity in home price growth across metros. Home prices in markets such as Houston, which was badly impacted by the oil industry’s collapse and the recent hurricane season, are anticipated to fall 0.9 percent by June 2022.
Latest Housing Trends: A Single-digit Price Increase for Five Weeks in a Row!
Realtor.com’s weekly market data for the week ending August 28, 2021, shows that the median home price of all the listings increased by 8.6 percent over last year. Following a streak of double-digit price growth, it now marks five straight weeks of single-digit price growth. Home listing prices rose by 8.5 percent in July of last year, which is the same as today’s rate of appreciation.
Despite the slower growth rate, the median list price of a home remains near its record high of $385,000 set in July, at $380,000. Additionally, this rate of growth is higher than in the past. As is customary in the fall, Realtor.com anticipate prices to ease slightly, resulting in continued strong pricing for sellers and a window of opportunity for buyers.
The demand for housing continues to outpace the supply, but the steady increases in supply have made a positive difference. For the second week in a row, the growth in new listings has slowed, but new sellers are entering the market each week more frequently than in previous years. With more supply and slower price growth, homes on Realtor.com’s platform are staying longer. The number of days a property sits on the market has cooled from June levels. The good news is that markets are entering a golden opportunity window this autumn. Buyers may find more opportunities to take advantage of the return of the off-season and a promising harvest of smaller, more affordable homes for sale.
- While the median listing price continues to rise, growth has slowed significantly to single digits as sellers list smaller, more affordable homes in the second half of 2021.
- In August, the median price fell slightly from July’s record of $385,000, indicating normal seasonal cooling that was lacking last year.
- New listings–a measure of sellers listing their homes–rose just 1.2%.
- The number of homeowners listing their homes for sale has been an important indicator in a housing market short on supply.
- This week’s gain was smaller than recent gains, but it may be a temporary setback as the end of summer and school season approaches.
- Active inventory is down only 24% year-on-year.
- Buyers will still find fewer homes for sale than last year, but the gap has closed for 21 weeks in a row.
- The pace of improvement slowed this week due to fewer new listings.
- At this rate, we may not reach last year’s inventory by the end of 2021.
- Time on market was down 15 days. Homes in good condition sell quickly.
- In August, the average active listing lasted 39 days, just two days longer than in June.
- That said, we expect home sales to remain faster than in previous years.
Here’s how the national housing market has been trending for the past couple of weeks and its comparison with the time when the shutdowns were imposed in the country.
|WEEKLY HOUSING STATISTICS|
|Key Housing Stats (YoY)||First 2 Weeks March 2020||Week Ending Aug 14||Week Ending Aug 21||Week Ending Aug 28|
|Median Listing Prices||+4.5%||+8.6% YOY||+8.6% YOY||+8.6% YOY|
|New Listings||+5% YOY||+6% YOY||+2% YOY||+1% YOY|
|Total Listings||-16% YOY||-26% YOY||-25% YOY||-24% YOY|
|Time on Market||4 days faster YOY||18 days faster YOY||17 days faster YOY||15 days faster YOY|
Existing-Home Sales Increase For The Second Month in a Row in July 2021
- Although the housing market appears to be cooling, it remains competitive.
- Homes spend an average of 17 days on the market.
- Existing home sales increased at a faster rate than the previous month.
- The National Association of Realtors reported that sales increased 2% from the previous month to a seasonally adjusted annual rate of 5.99 million, up from a revised 1.6 percent increase in June.
- Housing sales were up 1.5 percent year on year.
- Nationwide, sales for homes priced $100,000 to $250,000 were down 28%.
- Sales of homes between $500,000 and $750,000 were up 32%.
- Sale of homes between $750,000 and $1 million were up 53%.
- “The housing market went through a big swing during the COVID lockdown. Once the economy reopened, now the sector appears to be settling down,” said Lawrence Yun, NAR chief economist.
- Before the pandemic, home sales were at about 5.5 million and now sales are under about 6 million units.
- The median existing-home price for all housing types in July was $359,900, up 17.8% from July 2020.
- Each region of the U.S. saw prices climb in July.
- This marks 113 straight months of year-over-year gains, but marks a slowdown from the 20% to 29% price growth from a year ago.
- The median price growth was lifted by more sales of homes above $500,000 in price.
- This rise in sales has been attributed to an increase in housing supply.
- As the late summer approaches, the months ahead contain critical clues to the post-pandemic future of the housing market.
As more homes were listed on the market, existing-home sales in the US housing market climbed for the second month in a row, according to figures provided by the National Association of Realtors. If sales continue to boost recent growth, despite the rising inventory, it should increase builders’ confidence and persuade them that high housing demand is not a short-term phenomenon. Record high prices, combined with a scarcity of available homes, are making it especially difficult for first-time buyers to enter an increasingly competitive housing market.
In June, first-time buyers represented roughly a third or 30% of sales, whereas they are usually around 40% historically. Houses are being taken off the market faster, and all-cash sales have increased. Almost a quarter of all buyers are paying in cash, which is a higher proportion than usual. The inventory of homes at the end of July stood at 1.32 million, down 12% from a year ago, but that is a smaller annual decline than in recent months. At the current sales pace, that represents a 2.6-month supply.
The National Association of Realtors had released research from the Rosen Consulting Group, estimating that between 5.5 million and 6.8 million new houses are needed to meet the demand. All the four major U.S. regions notched double-digit year-over-year gains. The South accounted for over half of all the sales in July, accounting for 44 percent, followed by the Midwest at 23 percent and the West at 21 percent, with the Northeast accounting for only 12 percent. Highest sales were seen in the price segment of $250,000 to $500,000. This price range accounted for 43% of total home sales seen in July.
Existing home sales were expected to fall but remain elevated, averaging around 6.0 million units this year. Building permits and housing starts are at levels not seen since the previous housing boom. The popular belief is that it is still a good time to sell and that ultimately means that the numbers of home sellers that hit the market are constantly increasing.
This implies that while house prices are still rising, home sellers may need to consider pricing more competitively than in the past couple of months. These latest market trends (seen in July/August) also point to a shift in real estate activity, implying that we may have passed the peak of this hot housing market, which is good news for home buyers.
The market is still heavily skewed toward sellers, but we may be seeing the first signs of a return to a more balanced real estate market following the most active sales period in years. As of today, the housing market remains far from normal, with inventories falling by more than 33% over the past year. The current supply of homes on the market still remains historically low. With the recovering economy, more buyers are entering the market.
And, because there is still a limited supply of housing inventory, home prices continue to rise even in a low-interest-rate scenario. With increased supply, home price growth will gradually moderate, but a broad price decline is unlikely. The housing market will continue to attract buyers as a result of the drop in mortgage rates as well as an increase in new listings.
Existing Housing Sales in July 2021
(Regional Breakdown By N.A.R.)
|Northeast||Existing-home sales in the Northeast remained steady in July, registering an annual rate of 740,000 for the second straight month, a 12.1% rise from July 2020.|
|The median price in the Northeast was $411,200, up 23.6% from one year ago.|
|Midwest||Existing-home sales in the Midwest rose 3.8% to an annual rate of 1,380,000 in July, a 1.4% decline from a year ago.|
|The median price in the Midwest was $275,300, a 13.1% increase from July 2020.|
|South||Existing-home sales in the South rose 1.2% in July, recording an annual rate of 2,630,000, up 1.2% from the same time one year ago.|
|The median price in the South was $305,200, a 14.4% jump from one year ago.|
|West||Existing-home sales in the West grew 3.3%, posting an annual rate of 1,240,000 in July, equal to the level of a year ago.|
|The median price in the West was $508,300, up 12.5% from July 2020.|
New Home Sales in United States Are up 1% in July 2021
In July 2021, new home sales in the United States increased by 1% to a seasonally adjusted annual rate of 708K, matching forecasts of 700K and following a downwardly revised 2.6 percent drop in the previous month, according to estimates released jointly by the U.S. Census Bureau and the Department of Housing and Urban Development.
New home sales are 27.2 percent (±7.3 percent) below the July 2020 estimate of 972,000. It was the first increase in four months, with sales in the West increasing the most (14.4 percent to 215K), followed by the South (1.3 percent to 400K). Meanwhile, sales in the Northeast (-24.1 percent to 22K) and the Midwest (-24.1 percent to 22K) fell (-20.2 percent to 71K).
After a year of frenzied buying and price gains in the double digits, newly built homes are now out of reach for much of the demand that remains in the market. The majority of homebuyers are at the upper end of the market, and builders cannot afford to produce cheaper houses owing to rising building prices. The median sales price rose to $390,500 from $329,800 the previous year. The seasonally‐adjusted estimate of new houses for sale at the end of July was 367,000.
This represents a supply of 6.2 months at the current sales rate. The decrease in new housing sales suggests that demand is diminishing. Applications for house loans have declined this year, as have housing market surveys of potential purchasers. Higher building costs, longer delivery times, and general unpredictability in the construction supply chain are now having measurable impacts on new home prices. Softwood lumber increased by more than 300 percent during the epidemic, and while it has dropped considerably in the last month, it is still approximately 75 percent more than 2019 normal.
US House Building Permits Rebounded in July
Residential construction had ended in 2020 on a strong note. Housing starts rose 5.8% to 1.67 million annualized units in December. Total starts were 2.8% higher than a year ago. In July of 2021, housing starts in the US sank 7% to a seasonally adjusted annual rate of 1.543 million units, well below market forecasts of 1.6 million.
It is the lowest reading in 3 months, hurt by rising construction costs and home prices. Single-family housing starts fell 4.5% to a rate of 1,111,000 and those of buildings with five units or more dropped 13.6% to 412,000. Starts declined the most in the Northeast (-49.3%), the West (-11.3%) and the Midwest (-6.9%) but rose 2.1% in the South.
In July 2021, building permits in the United States rose 2.6 percent from a month earlier to a seasonally adjusted annual rate of 1.635 million in July 2021, following a three-month period of declines and beating market expectations of 1.61 million. The volatile multi-segment surged 11.2 percent to a rate of 587 thousand, while single-family authorizations dropped 1.7 percent to a rate of 1.048 million. Permits were up in the West (13.3 percent to 426 thousand) and Midwest (4.4 percent to 214 thousand), but were down in the South (-1.9 percent to 861 thousand) and Northeast (-0.7 percent to 134 thousand).
Housing Construction Trends & Homebuilder Confidence
The NAHB also gets input from builders on how confident they are in the housing market based on buyer behavior, sales, and incorporates any forecasts as well. Building permits have recovered from epidemic lows, and builders are scrambling to close the supply-demand imbalance. They are still optimistic a year after the Covid epidemic brought home development to a halt. Because the current house market continues to suffer from a record low number of listings, they are seeing high demand from potential purchasers.
It is becoming increasingly difficult for them to meet this housing demand due to supply delivery issues and rising material costs. NAHB Housing Market Index (HMI) is a gauge of builder opinion on the relative level of current and future single-family home sales. It is a diffusion index, which means that a reading above 50 indicates a favorable outlook on home sales; below 50 indicates a negative outlook. The latest reading of 80 in July, down from 81.00 last month and up from 72.00 one year ago. This is a change of -1.23% from last month and 11.11% from one year ago. is down slightly from last month.
“Builders are contending with shortages of building materials, buildable lots and skilled labor as well as a challenging regulatory environment. This is putting upward pressure on home prices and sidelining many prospective home buyers even as demand remains strong in a low-inventory environment,” said NAHB Chief Economist Robert Dietz.
The three major HMI indices were mixed in June. The HMI index gauging current sales conditions fell one point to 86, the component measuring traffic of prospective buyers dropped six points to 65 and the gauge charting sales expectations in the next six months posted a two-point gain to 81. Looking at the three-month moving averages for regional HMI scores, the Northeast fell four points to 75, the Midwest moved one-point lower to 71 and the West posted a two-point decline to 87. The South held steady at 85.
According to the NAHB, lumber prices have skyrocketed, particularly the price of oriented strand board, which has skyrocketed more than 500 percent above its January 2020 level. Despite the soaring lumber prices, demand continues to outpace supply, and shortages in just about every building material category are creating delays for contractors. As builder confidence in the market for newly-built single-family homes fell one point to 80 in July, strong buyer demand managed to offset supply-side issues related to building materials, regulation, and labor. NAHB is working with government officials to develop solutions to these sharp price increases which threaten housing affordability across the nation.
In 2021, the Mortgage Bankers Association (MBA) forecasts single-family housing starts to be around 1.134 million. And that could just be the beginning, as projections going forward are even rosier: 1.165 million single-family homes in 2022 and 1.210 million in 2023. New home builders will ramp up production to help relieve the shortage of inventory of homes for sale throughout the United States. The added inventory would no doubt aid buyers in their search to secure their dream home, while also helping to ease price increases throughout the country.
According to Urban Land Institute, real estate market conditions and values in the U.S. are expected to rebound in 2021 and trend even higher in 2022, with single-family homes outperforming other sectors such as commercial, retail, hotel, and rental. Home prices will grow an average of 4.1% over the next three years, above the long-term average of 3.9%, according to the report, based on a survey of 43 economists at 37 leading real estate organizations.
Is Something Big Is About to Happen in the Housing Market?
Even though most pandemic restrictions and business reopenings have been suspended, the market remains cautious about the outlook, particularly in light of the health concerns of autumn and winter. Moreover, lack of inventory remains the most significant impediment to home sales, but falling affordability (due to astronomical price increases) is simply driving some first-time buyers out of the market. According to Realtor.com, the typical home listing price touched a new high of $385,000 in June 2021, an increase of about 12 percent over the previous year. Home prices have never dropped, but they were flat this time last year.
However, the rate of home price growth has decreased by 2 percentage points since last month. As inventory continues to dwindle, there is no relief in sight for homebuyers. Before the cooling-off trends begin this fall, the median home price is predicted to reach new highs in the coming months. This year, more homeowners are listing their houses for sale, resulting in a record-high percentage of homes for sale being “new listings.” While the flood of sellers will help alleviate some of the competitive pressure that buyers are under, buyers must still make offers that are strong enough to win out in a multiple bid scenario.
Mortgage rates have been falling since November 2018, when they peaked at 4.94 percent, a five-year high. The rates were cut in 2020 as a result of the pandemic, which helped to mitigate the impact of increasing prices. In January 2021 it reached a record low of 2.65%, driven by massive monetary incentives and investors’ economic recovery concerns. Rates rebound from their lowest point in the first week of April to 3.18%. The Federal Reserve’s continued monetary easing, and especially the bank’s monthly purchases of mortgage-backed securities, is keeping a strong downward pressure on rates.
In 2021, mortgage rates are expected to average 3.1 percent, according to the National Association of Realtors, and 3.3 percent according to the Mortgage Bankers Association. These rate estimates are both up from the 3.0% mortgage rate average in 2020 but lower than 2019 average rates. The amount of time required to save an adequate down payment has increased in recent years, and putting together a down payment remains the most difficult hurdle most buyers will face on their way to homeownership. According to a Zillow analysis of home values and incomes, there are a few silver linings unique to today’s housing market that give first-time buyers a few advantages.
More aggressive savings and/or smaller down payments (buyers can put down as little as 3% in many cases) can significantly shorten the savings time. However, the lower upfront payment comes with higher monthly payments, but for many people, the opportunity to build equity outweighs those extra costs. Also, increased remote work opportunities can lead to more affordable areas, and ultra-low mortgage interest rates can make monthly payments manageable once the down payment is secured.
- First-time buyers today need a year longer to save for a 20% down payment than they did five years ago.
- Renters will need to save an additional $369 per month in the coming year just to keep up with the forecasted growth in home values.
- Most first-time buyers put down less than 20%, but today’s low mortgage rates mean monthly payments can remain affordable with a smaller down payment.
Low rates give borrowers more buying power and a significant decline in mortgage rates can help push up home prices as witnessed in recent months. If mortgage rates continue to rise in 2021, affordability is likely to become a bigger challenge this year. The combination of intense demand and the low mortgage rates has pushed home prices to levels that are making it difficult to save for a down payment, particularly among first-time buyers.
According to Bankrate’s latest survey of the nation’s largest mortgage lenders, as of August 11th, 2021, the average rate for a 30-year fixed mortgage is 3.05 percent, up 9 basis points since the same time last week. Last month on the 11th, the average rate on a 30-year fixed mortgage was lower, at 3.02 percent. The average rate for a 15-year fixed mortgage is 2.34 percent, up 8 basis points from a week ago.
- At the current average rate, you’ll pay $421.60 per month in principal and interest for every $100,000 you borrow.
- That’s an additional $6.44 per $100,000 compared to last week.
- Monthly payments on a 15-year fixed mortgage at that rate will cost roughly $384 per $100k borrowed.
Note: The larger payment may be more difficult to fit into your monthly budget than a 30-year mortgage payment, but it comes with some significant benefits: you’ll save thousands of dollars in total interest paid over the life of the loan and build equity much faster.
How Mortgage Rates Have Shifted Over The Past Week
- 30-year fixed mortgage rate: 3.05%, up from 2.96% last week, +0.09
- 15-year fixed mortgage rate: 2.34%, up from 2.26% last week, +0.08
- 5/1 ARM mortgage rate: 2.80%, the same as last week
- Jumbo mortgage rate: 3.07%, up from 2.97% last week, +0.10
The Federal Reserve’s actions last year to keep mortgage rates low have been maintained. However, when contrasted to the robust increase in home prices, the low mortgage rates are insignificant. Here’s an example to show how soaring home prices and plunging mortgage rates can have offsetting effects. Let’s say you chose to buy a $300,000 home a year ago when the 30-year mortgage rate was around 3.16 percent. Your 20 percent down payment would’ve been $60,000 and your monthly payment would’ve been $1,032. The price of the same house has jumped to $360,000 today. However, you can get a 30-year mortgage at 3.05 percent. As a result, your monthly payment rises only slightly, to $1,221.
However, you’ll have to come up with an extra $12,000 (20% of $360,000 = $72,000) to make a 20 percent down payment. Therefore, low mortgage rates help but don’t eliminate the risk of affordability crunch that the housing market could still face if home prices continue to rise at a rapid pace. Buying a home in a seller’s market can feel like you’re losing money. You may just wait a few months or even a year so that prices will flatten (or come down). The problem is that prices could keep rising to the point where you’re priced out of the market. There’s no guarantee either way.
You can opt to refinance at today’s rates to at least cut your monthly mortgage payments. The present scenario makes it appealing to buyers who have been spending all this money on rent. Demand is robust throughout the country, but homebuyers continue to be held back by the lack of homes for sale and rapidly increasing home prices. The combination of rising mortgage rates and increasing home prices will accelerate the decline in affordability and further squeeze potential home buyers during the spring home sales season.
Housing Affordability is driven largely by the gap between household income and home value. It is influenced by the balance between housing supply and demand, the labor market, and mortgage rates by way of Federal monetary policy. Housing is affordable when the housing of an acceptable minimum standard can be obtained and retained leaving sufficient income to meet essential non-housing expenditure.
The most commonly used indicator in the US and many other countries is the ratio of house prices to incomes or earnings. A higher ratio indicates relatively more affordability. A ratio of 100 indicates that median-family income is just sufficient to purchase the median-priced home. Ratios above 100 indicate that the typical household has more income than necessary to purchase the typical house. Therefore, low-income households spending a high proportion of their income on housing may and vice versa.
According to the NAR’s Housing Affordability Index, national housing affordability fell in April compared to a year ago. Affordability fell in April compared to March, as median family income fell by 1.0 percent while monthly mortgage payments rose by 16.1 percent. The effective 30-year fixed mortgage rate1 was 3.11 percent in April, down from 3.37 percent a year ago, but the median existing-home sales price increased 19.9 percent. As of April 2021, the national and regional indices were all above 100, meaning that a family with the median income had more than the income required to afford a median-priced home.
Housing affordability is down in all four regions since last month. The Midwest had the biggest decline of 12.0%, followed by the Northeast, which fell 10.7%. The South region fell 9.8%, followed by the West region, with the smallest decrease of 8.2%. The most affordable region was the Midwest, with an index value of 202.7 (median family income of $87,285, which is more than twice the qualifying income of $43,056). The least affordable region remained the West, where the index was 113.7 (median family income of $95,103 and qualifying income of $83,616).
The Federal Reserve has decided to leave the Fed Funds rate unchanged and gave every indication that policy moving forward is going to be largely unchanged. Mortgage rates will be affected by Fed policy only when the Fed stops purchasing MBS (mortgage-backed securities). As of now, Fed continues to take these measures to lower short-term interest rates. Federal Reserve will continue to increase its holdings of Treasury securities by at least $80 billion per month and of agency mortgage‑backed securities by at least $40 billion per month to support the U.S. economy and the housing market.
When they refer to agency MBS, they mean specifically purchasing those mortgage-backed securities which are made up of mortgages from Fannie Mae, Freddie Mac, and Ginnie Mae. Expect mortgage rates to continue to hover around record lows. The Federal Reserve has reassured that it will keep interest rates and its bond-buying program unchanged — downplaying any urgency to bring borrowing costs back up from their lowest levels in history at near zero.
The Fed has cut its target for the federal funds rate, the rate banks pay to borrow from each other overnight, by a total of 1.5 percentage points since March 3, 2020, bringing it down to a range of 0% to 0.25%. The federal funds rate is a benchmark for other short-term rates, and also affects longer-term rates, so this move is aimed at lowering the cost of borrowing on mortgages, auto loans, home equity loans, and other loans, but it will also reduce the interest income paid to savers.