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86 | TH E M R EP O RT O R I G I NAT I O N S E R V I C I N G DATA G O V E R N M E N T S E C O N DA R Y M A R K E T THE LATEST GOVERNMENT THE LATEST Funds Rate to Stay Same The Federal Open Market Committee cited potential labor and economic growth as the driving factors behind the decision. T he Federal Reserve elected to keep the current federal funds rate as-is at its Federal Open Market Com- mittee (FOMC) meeting in late July. The vote was unanimous among the Fed's board of governors and will keep the rate between 1 and 1.25 percent. "In view of realized and expected labor market conditions and inflation, the com- mittee decided to maintain the target range for the federal funds rate at 1 to 1.25 percent," the committee's statement read. "The stance of monetary policy remains accommodative, thereby supporting some further strength- ening in labor market conditions and a sustained return to 2 percent inflation." The FOMC voted to increase the rate twice earlier this year. The rate rose 25 basis points in March and another 25 basis points again in June. Most experts expected the Fed to stay the course this time around but believe it will raise rates a third time later this year. The Fed all but agreed in its statement today, saying that it "expects that eco- nomic conditions will evolve in a manner that will warrant gradual increases in the federal funds rate." Still, the statement read, "the actual path of the federal funds rate will depend on the economic outlook as informed by incoming data." "In determining the timing and size of future adjustments to the target range for the federal funds rate, the committee will assess realized and expected economic conditions relative to its objectives of maxi- mum employment and 2 percent inflation," the statement read. "This assessment will take into account a wide range of informa- tion, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments. The committee will carefully monitor actual and expected inflation developments relative to its symmetric inflation goal. The committee expects that economic condi- tions will evolve in a manner that will warrant gradual increases in the federal funds rate; the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run. However, the actual path of the federal funds rate will depend on the economic outlook as informed by incoming data." And although the Fed continues to stand behind the position it has held since June, the big question after today's nonaction is whether or not another rate hike will come before year's end. Brett Ewing, Chief Market Strategist at First Franklin, is skeptical. "The weak dollar continues to put the Fed in a goldilocks environment where the market isn't concerning itself with rates," he says. "And we don't think there will be a rate hike until 2018; that's the most likely scenario. Although December 2017 is in play but still it is less than 50 percent chance." The FOMC will meet next on September 19; the meeting will be accompanied with a press conference. FHA Money Hits Snag Federal Housing Administration-backed loans on new home purchases are on a downslide, NAH says. A ccording to experts at the National Associa- tion of Homebuilders (NAH), who recently analyzed the Census Bureau's Quarterly Sales by Price and Financing Report, FHA-guaranteed mortgage loans have fallen five full percentage points over the last year. FHA loans accounted for just 11.9 percent of all new home sales in Q2 of this year, falling below the 12 percent mark for the first time since 2014. "Over the long run, the current FHA share is less than half its 28 percent share from the first quar- ter of 2010 but still elevated com- pared to the 10 percent average of 2002–2003," the NAHB reported. Cash sales rose two percent- age points over the same period, making up 6.5 percent of all new home sales. According to the NAHB, cash sales typically make a bigger portion of existing-home purchases, but still, these numbers were down as well. "Although cash sales make up a small portion of new home sales, they constitute a larger share of existing-home sales," the NAHB reported. "Roughly 18 percent of existing-home transactions were all-cash sales in June—the smallest share since June 2009—according to estimates from the National Association of Realtors." Conventional loans comprised the bulk of all new Q2 purchases at 72.6 percent—a steep increase from just eight years ago. "Conventional financing has expanded as the housing recov- ery has continued," the NAHB reported. "The market share of new home sales with conventional financing was 62.2 percent in 2009 and 72.6 percent in the second quarter of 2017. This share has re- mained between 68 percent and 75 percent over the past four years." VA loans made up 8.9 percent of all new home mortgages in the second quarter, rising by about 15,000 loans total. However, the overall market share for VA products was down for Q2, falling 0.1 percent since earlier this year. Still, despite the slight downtick, VA loans are up significantly from the prerecession years, when an average of just 2.9 percent of all new home purchases were backed by VA products.