LOS ANGELES REAL ESTATE REPORT

No Surprises from Fed: What This Means for Your Real Estate Decisions

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This week brought several major economic reports, but little unexpected news. The Federal Reserve meeting had minimal impact on mortgage markets, and inflation data aligned with expectations. As a result, mortgage rates ended the week slightly lower.

 

Inflation Holds Steady

 

The Federal Reserve closely monitors inflation through the Personal Consumption Expenditures price index, its preferred inflation gauge. In December, core Personal Consumption Expenditures rose 0.2 percent from the previous month, matching forecasts. On an annual basis, core Personal Consumption Expenditures increased by 2.8 percent, holding steady from the prior month. While this is well below inflation’s peak in recent years, progress toward the Federal Reserve’s 2.0 percent target has been slow and remains a challenge. For real estate, stable inflation is good news for mortgage markets, as it reduces the likelihood of sudden rate hikes. Buyers may benefit from a more predictable rate environment, while sellers could see increased interest as affordability improves slightly.

 

Economic Growth Slows

 

Gross Domestic Product, the most comprehensive measure of economic activity, rose at an annualized rate of 2.3 percent in the fourth quarter of 2024. This was below the expected 2.6 percent growth rate and a slowdown from the 3.1 percent growth recorded in the third quarter. Consumer and government spending were the main drivers of growth, but declining inventories and the first drop in business investment in over three years weighed on the overall figures. For real estate, slower economic growth could lead to more cautious consumer spending, potentially impacting homebuying demand. However, as long as job security remains strong, the housing market should continue to see steady activity.

 

Federal Reserve Holds Rates Steady

 

As widely expected, the Federal Reserve made no changes to the federal funds rate on Wednesday. The statement following the meeting was nearly identical to the previous one, though investors took note of a minor wording change that removed a reference to inflation making progress toward the 2.0 percent target. During his press conference, Chair Jerome Powell clarified that this adjustment did not signal any new policy direction. Powell also acknowledged the uncertainty surrounding potential policy changes under the new administration but reaffirmed that future decisions will be based on economic data. For buyers and sellers, the Federal Reserve’s decision to hold rates steady signals a period of stability in mortgage markets. Buyers may find opportunities to lock in more predictable rates, while sellers can benefit from a steady flow of buyers in a less volatile market.

 

What This Means for Real Estate

 

With inflation data in line with expectations and the Federal Reserve holding its current stance, mortgage rates are likely to remain relatively stable in the near term. For buyers, this creates an opportunity to plan purchases with more confidence. Sellers can expect a market driven by steady demand, though pricing strategies should reflect broader economic conditions.

 

Staying informed about economic trends is key to making smart real estate decisions. Whether buying or selling, understanding these shifts can help you navigate the market with confidence.