The Consumer Price Index, tracking the economy during the first month of 2024, suggests that the Federal Reserve will be unlikely to cut interest rates until late spring at the earliest.

Data for January showed that the annual inflation rate registered at 3.1%. While this is a noticeable decrease from the 3.4% of December, economists projecting a springtime Federal Reserve interest rate cut to stimulate the market based those projections on an expectation that the inflation rate would below 3% for the first month of 2024.

Unless a drastic decrease in inflation occurs during the month of February, the Federal Reserve will likely not act on interest rates until the decline is back on track to meet its goal of a 2% rate for 2024.

“For the housing market, today’s data means that mortgage rates are likely to hang on to the narrow range they’ve occupied since late December, while likely moving toward the upper end of that range,” said Realtor.com Chief Economist Danielle Hale.

The high cost of housing is one factor keeping inflation as high as it has been, and rent costs have continued to be a serious concern for the economy as a whole.

U.S. single-family rent growth increased 2.7% year-over-year in January 2024, according to Corelogic’s U.S. Single-Family Rent Index.

The Alabama Association of Realtors (AAR) annual report projects an 89% chance of a fed funds rate cut sometime in the month of May, and possibly a large one of up to 50 basis points. The AAR projects that such a large cut would, when combined with the net positive domestic migration to the state – the Census Bureau reported 30,700 people moving to Alabama over 2023 – and the continuing buildup of housing inventory in the state, result in a jump-starting of the real estate market in Alabama.

The Huntsville Area Association of Realtors (HAAR) report for the first week of February supports this outlook of a potential upsurge in market activity. While pending sales for single-family units decreased by 7.8%, new listings of single-family units were up 10%, while inventory continued to increase, rising by 10.8%.

Townhouse and condo units in the Huntsville Market Area saw their pending sales rise by 77.8%, while new listings and inventory increased by 100% and 27.4%, respectively.

These indicators are good news for the rental market, because, according to Fan-Yu Kuo, an economist for the National Association of Home Builders, rent increases are largely driven by a lack of affordable supply and rising development costs.

“Additional housing supply is the primary solution to tame housing inflation,” says Kuo.

The Huntsville Business Journal will continue to monitor the housing market, both nationally and here at home, and report on developments as they occur.