Question

1. ) In February 2020 the Home Builders Association took a poll of its members and found that they were very optimistic for home sales and building throughout 2020. The resulting sales of new and existing homes unfortunately turned out to be considerably more sluggish than anticipated. With rising household incomes, what macroeconomic factors may have been the cause of this sluggishness? Recall the Fed began lowering interest rates at the end of June 2019 and did not change rates in the December 2018 FOMC meeting. However, the Fed continued to lower rates to near zero in March 2020.What role do interest rates play in households’ decisions to buy houses and builders’ decisions to build houses?

Answer 1

Fed lowers interest rates to boost economy, interest rates in the USA depend on various factors that are inflation, the health of the economy. In USA the majority of houses are on the mortgage

If the interest rate is lower ultimately that is transferred to the customer level and they can easily take the mortgages which in turn promote the housing sector or economy

as the demand will increase so ultimately it will reduce the inventory with the builders

but ultimately it will also affect the housing prices for an upward shift in long run if rates remain at lower level for long term