21
Mar
By support
Financial Reports

What’s Ahead For Mortgage Rates This Week – March 21, 2016

What's Ahead For Mortgage Rates This Week - March 21, 2016Housing Starts Up in February

Shortages of available homes are a major factor in rising home prices; shortages also make it more difficult for buyers to find homes they want. Housing starts in February rose, which is good news for the peak spring and summer home buying season. Other housing related news released last week included the Fed’s decision not to raise the target federal funds rate and Housing Starts and Building Permits reports issued by the Commerce Department. Consumer Sentiment was also released along with regularly scheduled releases on mortgage rates and weekly unemployment claims.

Builder Confidence Holds Steady, Real Estate Pros Call for More Construction

According to the NAHB/Wells Fargo Housing Market Index for March, home builder confidence held steady at a reading of 58. Analysts expected an uptick to 59 based on February’s reading of 58. Any reading above 50 indicates that more builders have confidence in housing market conditions than those who do not. The overall HMI reading is based on three components including builder perception of current market conditions, market conditions within the next six months and buyer foot traffic in new home developments.

Builder confidence in current market conditions held steady at a reading of 65. Builder confidence in market conditions within the next six months dropped three points to 65. Builder confidence in buyer foot traffic increased four points to a reading of 43. Confidence in buyer foot traffic has not topped a reading of 50 since 2005.

High demand for homes coupled with a short supply of affordable suburban single family homes compelled NAR Chief Economist Lawrence Yun to comment, “Imbalances in supply and demand and unhealthy levels of price growth in several metro areas have made buying a home an onerous task for far too many first-time buyers and middle class families.” Mr. Yun called for builders to double their focus on building single family homes.

Housing Starts Hit 9-Year High in February

Reports on housing starts and building permits issued indicate good news for the shortage of available homes.

The Commerce Department reported that housing starts rose from January’s reading of 1.120 million starts to an annual level of 1.178 million starts. Analysts expected a reading of 1.153 million starts. Building permits also increased from January’s reading of 1.120 million permits to 1.167million permits issued. Analysts forecasted a reading of 1.210 million in February.

Mortgage Rates Rise, Fed Holds Interest Rate Steady

The Federal Reserve announced its decision not to raise the target federal funds rate on Wednesday. The current rate is 0.250 to 0.50 percent. Policymakers cited concerns over global economic developments as a reason for their decision. This decision quickly showed an impact on Thursday. Freddie Mac reported average rates rose across the board. The rate for a 30-year fixed rate mortgage rose five basis points to 3.73 percent. 15-year mortgage rates averaged 2.99 percent, which was three basis points higher than the prior week’s reading. The average rate for a 5/1 adjustable rate mortgage rose by one basis point to 2.93 percent. Discount points averaged 0.50, 0.40 and.50 respectively.

Weekly jobless claims rose to 268,000 against expectations of 268,000 new claims and the prior week’s reading of 258,000 new jobless claims.

Consumer sentiment dropped to 90.00 in March against an expected reading of 92.10 and February’s reading of 91.70. Consumer outlook is important to housing markets as the decision whether or not to buy a home is typically based on potential buyers’ evaluations of job stability and affordability of available homes.

What’s Ahead This Week?

This week’s scheduled economic releases include reports on new and existing home sales as well as usual weekly releases on mortgage rates and new jobless claims.

17
Mar
By support
Financial Reports

Fed Policymakers Make Interesting Decision on Interest Rates

Fed Policymakers Make Interesting Decision on Interest RatesAccording to a press release by the Federal Reserve, the Federal Open Market Committee (FOMC), the current target federal funds rate will hold steady at  0.25 to 0.50 percent. Committee members cited positive developments in the U.S economy including jobs growth, stronger labor markets and gradually increasing inflation. In addition, stronger housing sector and household spending were also noted as positive signs for the economy. Committee members cited risks associated with global economic and financial developments as a concern.

FOMC members are guided in decision making by the Federal Reserve’s dual mandate of maximum employment and price stability. Inflation remains below the committee’s longer-term goal of 2.00 percent; FOMC members attributed slow inflation growth to lower energy prices. The Fed described its current monetary policy stance as “accommodative” and expects it to remain so until inflation reaches 2.00 percent.

Analysts said that the Fed has scaled back its forecast for rate increases from four increases to two increases in 2016, but any actions will depend on FOMC review of current and expected domestic and global factors. Fed Chair Janet Yellen previously cited turbulent market conditions as “significantly” tightening financial conditions due to lower stock prices.

Fed Chair  Janet Yellen‘s Press Conference

Fed Chair Janet Yellen explained policy makers’ decision not to raise the target federal funds rate in a press conference after the FOMC statement. Chair Yellen responded to media representatives’ questions about FOMC’s views on inflation and unemployment, zero or negative interest rates and uncertainty about China’s economy

Ms. Yellen cautioned against over-emphasis of the relationship between unemployment and inflation as employment rates only modestly impacts tracking inflation indicators as they relate to wages and prices. In her remarks about the decision not to raise the target federal funds rate, Chair Yellen cited uncertainty about China’s economy as a factor in the decision not to raise the benchmark federal funds rate.

The U.S. economy is strengthening as Europe and Japanese economies wane. Chair Yellen indicated that although global economic decisions influence U.S. monetary policy, that U.S. decisions are not based solely on global economic and financial developments.

In response to a question about whether the FOMC has considered the effects of zero to negative interest rates used by Japan and other nations, Chair Yellen said that committee members were not actively considering or discussing negative interest rates in view of improving economic conditions. Ms. Yellen said that Japan incorporated negative interest rates but did not realize the desired effect of increasing inflation.

Media analysts said that a rate increase in April’s FOMC meeting seems unlikely, but with world-wide economic conditions changing quickly, such, forecasts can’t be cast in cement.

07
Mar
By support
Financial Reports

What’s Ahead For Mortgage Rates This Week – March 7, 2016

What's Ahead For Mortgage Rates This Week - March 7, 2016Week in Review

Last week’s scheduled economic news included reports on pending home sales, construction spending and several jobs related readings including ADP Payrolls, the government’s Non-Farm Payrolls and the national unemployment rate.

Mortgage Rates, Weekly Unemployment Claims Rise

Mortgage rates rose across the board according to Freddie Mac’s weekly report. The average rate for a 30-year fixed rate mortgage rose two basis points to 3.64 percent; the average rate for a 15-year fixed rate mortgage rose by one basis point to 2.94 percent and the average rate for a 5/1 adjustable rate mortgage rose five basis points to 2.84 percent. Discount points were consistent at 0.50 percent for all three types of home loans.

Weekly jobless claims also rose to 278,000 new claims as compared to expectations of 270,000 new claims and the prior week’s reading of $272,000 new jobless claims. While an increase in new unemployment claims may seem discouraging, new claims for unemployment remain near pre-recession lows.

The four-week rolling average of new jobless claims dropped by 1750 claims to 270,250 and reached its lowest reading in three months. Analysts view the four-week reading as more reliable than week-to-week readings that can be volatile.

Pending Home Sales and Construction Spending

In other news, pending home sales fell by 2.50 percent as compared to December’s reading. Analysts expected an increase in pending sales of 0.50 percent; December’s reading was 0.10 percent higher than for November. Pending home sales represent sales contracts that have not yet closed and are considered an indicator of future closings and mortgage activity.

Home sales have been impacted in recent months by a shortage of available homes; this creates a backlog of would-be buyers who can’t find homes they want to buy and also causes rapidly escalating home prices in desirable areas. Bidding wars and cash sales can sideline buyers who can’t pay cash or are whose offers are outbid.

Analysts say that new home construction is a key component of easing the housing shortage. Construction spending increased by 1.50 percent in January, but month-to-month spending for residential projects was flat in January. Spending for residential projects was 7.60 percent higher year-over-year.

Labor Reports Reflect Stronger Economy

Federal and private sector reports on jobs indicate that job growth continues. The Department of Commerce reported that Non-Farm Payrolls grew by 242,000 jobs in February, which was higher than expectations of 195,000 new jobs and January’s reading of 172,000 new jobs. According to ADP, which tracks private sector payrolls, 214,000 new jobs were created in February as compared to expectations of 185,000 new jobs and January’s reading of 193,000 new jobs.

Improving jobs markets are a positive indicator for housing markets as stable employment is important to home buyers’ ability to qualify for mortgages. The National Unemployment Rate remained stable in February with a reading of 4.90 percent; the expected reading and prior month’s reading were also 4.90 percent.

What‘s Ahead

Next week’s scheduled economic reports include the NFIB Small Business Index and February’s Federal Budget along with regularly scheduled weekly reports on mortgage rates and new unemployment claims.