Fed Cuts Rate But Signals Slowing Pace of Easing Ahead
In a widely anticipated move, the Federal Reserve’s Federal Open Market Committee (FOMC) reduced the short-term federal funds rate by an additional 25 basis points at the conclusion of its December meeting. This policy move reduces the top target rate to 4.5%.
However, the Fed’s newly published forward-looking projections also noted a reduction in the number of federal funds rate cuts expected in 2025, from four in its last projection to just two 25 basis point reductions.
The new Fed projection envisions the federal funds top target rate falling to 4% by the end of 2025, with two more rate cuts in 2026, placing the federal funds top target rate to 3.5% at the end of 2026. One final rate is seen occurring in 2027.
The Fed also increased its estimate of the neutral, long-run rate (sometimes referred to as the terminal rate) from 2.9% to 3%, which is reflective of stronger expectations for economic growth and productivity gains.
For home builders and other residential construction market stakeholders, the new projections suggest an improved economic growth environment, one in which there is a smaller amount of monetary policy easing, leading to higher than previously expected interest rates for acquisition, development and construction (AD&C) loans. Thus, more economic growth but higher interest rates.
The statement from the December FOMC summarized current market conditions as:
Recent indicators suggest that economic activity has continued to expand at a solid pace. Since earlier in the year, labor market conditions have generally eased, and the unemployment rate has moved up but remains low. Inflation has made progress toward the Committee’s 2 percent objective but remains somewhat elevated.
NAHB Chief Economist Robert Dietz provides further insights in this Eye on Housing post.
Latest from NAHBNow
Economics
Sep 28, 2026
Median Revenue of NAHB Remodelers Grows 24%
According to the NAHB Member Census, 21% of NAHB builder members listed residential remodeling as their primary business. These remodelers tend to be relatively small, with a median of five employees and a median annual revenue of $2.1 million.
Labor
Sep 25, 2026
NAHB Amicus Brief Argues for Fair Due Process for Workers
NAHB filed an amicus brief in the Fifth Circuit immigration case Sosnava Rodriguez v. Ortega. The case asks whether a person who entered the United States without official inspection may seek release on bond from a judge while the government considers deportation.
Latest Economic News
Economics
Sep 28, 2026
Market Share of 5,000+ Sq. Ft. Homes Edges Higher in 2025
New homes with 5,000 square feet or more of living space posted an increase in market share last year. In 2025, 27,000 homes of this size were started, accounting for 2.9% of all new homes started. Both the number and market share of homes with 5,000 square feet or more increased from 2024, according to annual data from the Census Bureau’s Survey of Construction (SOC).
Economics
Sep 28, 2026
NAHB Remodelers: What the Data Says
Twenty-one percent of NAHB builder members listed residential remodeling as their primary business, according to the 2025 Member Census. These remodelers tend to be relatively small, with a median of five employees and a median annual revenue of $2.1 million. This means that remodelers are even smaller than NAHB builder members, who had a median of six employees and median annual revenue of $3.7 million, as reported in a recent post.
Economics
Sep 25, 2026
State and Local Government Tax Revenue Grows
Total tax revenue collected by state and local governments was up 5.8% from a year ago in the second quarter, according to the Quarterly Summary of State and Local Government Tax Revenue published by the U.S. Census Bureau. This was the highest year-over-year growth since the third quarter of 2024 (7.2%).