The Federal Reserve’s Federal Open Market Committee decision Wednesday to freeze the federal funds rate after 17 consecutive increases “indicated that the Federal Reserve recognizes the value of the housing economy to the national economy as a whole,” according to a National Association of Realtors announcement.
Thomas M. Stevens, president for the Realtors trade group and senior vice president at Realogy Corp.’s NRT Inc., said in a statement, “This move sends a very positive signal to the housing sector, which has been so robust over the past five years, that it has sustained the economy while other sectors have lagged.
“Largely as a direct result of more than two years of interest-rate hikes, the housing market today is fragile in some parts of the country,” Stevens said. “The Fed’s decision indicates that it realizes the vital role housing plays in the economy.”
The committee’s decision leaves the banks’ prime lending rate, the benchmark for various consumer and business loans, at 8.25 percent. Before the Fed started raising rates in June 2004, the prime had been at 4 percent. Stevens said the Fed’s decision indicates that the Fed is aware that economy has slowed — especially the housing economy.
“We can’t continue to raise rates without expecting the housing economy to suffer. That translates into higher costs for home buyers, slower sales and a lower level of economic activity in housing, which accounts for one-fourth to one-fifth of the gross domestic product,” he stated.