11
Apr
By First Rate Financial Group
Real Estate

FOMC Minutes Reveal Fed Policymakers U-Turn

FOMC Minutes Reveal Fed Policymakers U-TurnMembers of the Federal Reserve’s Federal Open Market Committee voted to hold the target range of the federal funds rate to its current range of 2.25 to 2.50 percent. The minutes of the most recent Committee meeting cited softening domestic and global economic conditions as reason for not raising the target federal funds range.

While labor markets remained strong, the minutes noted that household spending and business investment slowed in the first quarter of 2019. FOMC members expected Gross Domestic Product growth to slow as compared to its 2018 pace.

While current inflation and the national unemployment rate fell in line with the Fed’s dual mandate of seeking maximum employment and price stabilization, inflation fell due to falling fuel prices. The meeting minutes said that the Committee would be patient as it determined which, if any, action would be appropriate regarding the federal funds rate.

Strong Labor Sector Indicators Offset Lower GDP

Labor sector indicators remained strong with a national unemployment rate of 3.80 percent; labor force participation rose and the ratio of employment to population also rose. Strong employment and consumer sentiment readings suggested that more households may transition from renting to buying homes. Home sales recently fell due to affordability issues and rising mortgage rates.

Factors influencing FOMC monetary policy decisions include labor market conditions, inflation expectations and readings on domestic and international financial developments. The meeting minutes noted that near-term adjustments to monetary policy were dependent on changes to current economic outlook according to emerging data. The Committee consistently says that monetary policy positions can change according to developments in global and domestic economic data.

Fed Chair‘s Press Conference

Federal Reserve Chairman Jerome Powell said during his post-FOMC meeting press conference that the Committee’s “wait and see” stance on raising the target range of the federal funds rate was based on information received since growth expectations based on 2018’s economic growth rate of 3.10 percent. As of September 2018, the Fed forecasted economic growth of 2.50 percent in 2019, but subsequent information caused the Fed to downwardly revise its growth estimate.

Mr. Powell said that global economic slowing was expected in Europe and China; unresolved issues including Brexit and ongoing trade negotiations were given as reasons for slower global economic growth. While domestic and international economic forecasts indicated a modest slowdown in economic growth, Chairman Powell said that overall economic conditions remained favorable.

If you are in the market for a new home or interested in refinancing your current property, be sure to consult with your trusted home mortgage professional.

25
Mar
By First Rate Financial Group
Financial Reports

What’s Ahead For Mortgage Rates This Week – March 25th, 2019

What’s Ahead For Mortgage Rates This Week – March 25th, 2019Last week’s economic news included readings from the National Association of Home Builders, Federal Reserve Federal Open Market Committee and a press conference by Fed Chair Jerome Powell.

Sales of pre-owned homes in February were reported along with weekly readings on mortgage rates and new jobless claims.

NAHB: Builder Confidence Unchanged Despite Headwinds

Home builders remained confident about housing market conditions in March. The NAHB Housing Market Index posted a reading of 62, which matched February’s reading and fell one point short of expectations. NAHB Index readings above 50 represent a positive outlook on housing market conditions.

Home builders continued to face obstacles including high materials costs and lack of buildable lots and labor. Analysts said builders focused on building larger homes, which were not affordable for many prospective buyers.

FOMC: Fed Puts Brakes on Interest Rate Hikes

Monetary policymakers reversed course on raising the target range for federal funds and voted not to raise the current rate range of 2.25 to 2.50 percent. FOMC members cited global economic concerns including Brexit and wavering economic conditions in China.

While the U.S. Labor sector was strong with ongoing jobs and wage growth and low national unemployment, FOMC members said that the Fed could be “patient” about raising rates and did not expect to raise rates in 2019. Slowing economic growth and inflation were reasons for holding interest rates steady.

Fed Chair Jerome Powell described the current economy as “good” and said that the Fed would gradually roll back its accommodative purchase of treasury bonds. This news was likely to cause yields on 10-year Treasury notes to fall; this would cause mortgage rates to fall due to their connection with 10-year Treasury notes.

Pre-Owned Home Sales Hit 11 Month High in February

The National Association of Realtors® reported 5.50 million sales of pre-owned homes on a seasonally-adjusted annual basis. February sales reading fell short of 5.12 million sales expected but were higher than the rate of 4.93 million sales in January.

February’s reading was 11.80 percent higher than January’s sales. The sales pace was 1.80 percent lower year-over-year, but the median sale price of preowned homes was $249,500., which was 3.60 percent higher year-over-year.

First-time buyers accounted for 34 percent of sales; this falls short of the typical 40 percent participation rate for first-time buyers. Affordability and strict mortgage qualification requirements continued to challenge first-time and moderate-income buyers.

Mortgage Rates, New Jobless Claims Fall

Freddie Mac reported lower average rates for fixed rate mortgages. 30-year fixed mortgage rates were three basis points lower and averaged 4.28 percent; Mortgage rates for 15-year fixed rate mortgages averaged 3.71 percent and were five basis points lower on average. The average rate for a 5/1 adjustable-rate mortgage was unchanged at 3.84 percent. Discount points averaged 0.40 percent for fixed-rate mortgages and 0.30 percent for 5/1 adjustable rate mortgages.

First-time jobless claims were lower last week with 221,000 new claims filed. Analysts expected 225,000 new claims based on the prior week’s reading of 230,000 new claims filed.

What‘s Ahead

This week’s scheduled economic news includes readings on housing starts and building permits issued, new and pending home sales and inflation. Weekly readings on mortgage rates and new jobless claims will also be released.

22
Feb
By First Rate Financial Group
Real Estate

FOMC Meeting Minutes: Why Fed’s Rate Policy Reversed Course

FOMC Meeting Minutes: Why Fed’s Rate Policy Reversed CourseAfter raising the target range for the federal funds rate in 2018, the Fed’s Federal Open Market Committee did not raise the Central Bank’s key interest rate at its meeting of January 29 and 30. While Committee members did not raise the Fed’s key rate, members were divided on the interest rate decision.

FOMC Members Divided On Interest Rate Decision

Minutes of January’s FOMC meeting indicated that member viewpoints varied about how the Fed should deal with the Fed’s target interest rate range. One group said that interest rate increases may be necessary if inflation increases above the Federal Reserve’s baseline forecast.

Other FOMC members supported raising the Fed’s interest rate range later in 2019 if economic conditions move as expected. Overall, FOMC members said that there were “few risks” in the Committee’s current position of patience, but they were open to reassessing that position according to how economic conditions change.

FOMC Cites Reasons For Halting Rate Increases

Committee members provided several reasons for reversing their 2018 policy of consistent rate hikes including declining economic conditions since early 2018. Global and domestic economic conditions slowed; deteriorating conditions were supported by lower readings on consumer and business sentiment. Federal government policies including the partial government shutdown and then-current trade policy contributed to the deteriorating economic outlook in late 2018.

Ongoing influences driving FOMC monetary policy decisions include the Fed’s mandate for achieving maximum employment, stable prices and moderate long-term interest rates. Because short-term data change frequently, Fed monetary policy reflects long-term goals, medium-term outlook and the Committee’s risk assessments in multiple financial and economic sectors. The Committee said that long-term inflation of two percent indicates stable pricing as required by federal mandate; any prolonged deviation above or below the two percent reading would concern Committee members.

FOMC indicated progress with its maximum employment mandate by changing its long-run unemployment outlook from 4.60 percent to 4.40 percent, which suggests a strong outlook for job markets. Fourth quarter Gross Domestic Product was described as “solid”. The meeting minutes indicated that some data typically used by Committee members was limited by the government shutdown.