“We are in the middle innings of monetary policy normalization. Interest rates that the Fed directly controls – the federal funds rate – were raised three times in 2017. Today’s action is the first of three rate hikes in 2018. Another three hikes are likely on deck in 2019. Mortgage rates do not move one-to-one with the Fed tightening, but clearly consumers should anticipate higher mortgage rates as time proceeds.
The tight labor market will hurry-along the Fed to raise rates. Housing costs are also rising solidly and contributing to faster inflation. The one thing that could slow the pace of rate increases would be to tame housing costs through an increased supply of new homes. Not only will more home construction lead to a slower pace of rate hikes, it will also lead to faster economic growth. Let’s put greater focus on boosting home construction.”