Mortgage Rates

Last week’s economic readings included Case-Shiller Home Price Indices, pending home sales and consumer confidence. Weekly readings on mortgage rates and new jobless claims were also released.

Case–Shiller: Home Prices Continue Growth

Case-Shiller Home Price Index reports indicated incremental growth in October with home prices growing month-to-month 0.70 percent for the S&P Case-Shiller 30-City Home Price Index. The 20-city index posted 6.20 percent gains year-over-year. Western cities continued to post the largest gains; Seattle, Washington led with a year-over-year growth of 12.70 percent. Las Vegas, NV and San Diego, California rounded out the top three with year-over-year home price growth of 10.20 percent and 8.10 percent.

Pending Home Sales Subject to Slim Inventory of Available Homes

Homes under purchase contract rose by 0.20 percent in November as compared to an increase in pending sales of 3.50 percent in October. Analysts expected pending sales to rise by 0.50 percent in November. Extremely low inventories of available homes continued to dampen home purchases in November. The National Association of Realtors® said there was a 3.40 months’ supply of homes for sale as compared to an average reading of a six months supply.

Small inventories of homes for sale constrict sales by driving up prices, increasing buyer competition and challenging buyers to find homes they want buy among limited choices.  Pending sales varied by region with the Northeast posting a 4.10 percent increase in pending sales; the Midwest posted an increase of 0.40 percent in pending sales The South posted a decline in pending sales of -0.40 percent. The West posted a decrease of 1.80 percent, which could indicate that rapidly rising prices in Western markets are topping out. Analysts said that the disparity between pending home sales and completed sales of pre-owned homes made it difficult to accurately assess the future housing market trends.

Mortgage Rates Rise, Consumer Confidence Highest in 17 Years

Freddie Mac reported higher average mortgage rates last week. Rates for a 30-year fixed rate mortgage averaged five basis points higher at 3.99 percent; the average rate for a 15-year fixed rate mortgage was six basis points higher at 3.44 percent. The average rate for 5/1 adjustable rate mortgages was eight basis points higher at 3.47 percent. Discount points were unchanged on average at 0.50 percent for fixed-rate mortgages and 0.30 percent for 5/1 adjustable rate mortgages. Analysts had forecast a hike in mortgage rates after the Fed raised its target federal funds rate.

Consumer confidence rose to its highest rate in 17 years in November. December’s month-to-month index reading was 122.10 as compared to an expected reading of 127.5 and November’s reading of 128.6.  Although confidence dipped in December, analysts said that consumers are confident about jobs and the economy.

What‘s Ahead

This week’s economic readings include releases on construction spending, ADP and Non-farm payrolls and the National unemployment rate. Weekly readings on mortgage rates and first-time jobless claims will also be released

Last week’s economic reports included readings on NAHB homebuilder confidence, housing starts, building permits issued and sales of previously-owned homes. Weekly releases on mortgage rates and new jobless claims were also released.

Builder Confidence Rises, Housing Starts Increase

According to the National Association of Home Builders Housing Market Index for December, builder confidence in housing market conditions rose by four points to 74. This reading was the highest since 1999. Builder confidence increased based on strong labor markets, demand for homes and potential tax breaks resulting from proposed tax code revisions.

Housing and real estate industries continued to cite an imbalance caused by high demand for homes and few available homes for sale. Increasing production of new single-family homes is the only way to ease the discrepancy between supply and demand. Reducing demand for homes would also slow the pace of home price growth, which impacted the ability of first-time and moderate-income home buyers to purchase homes.

Commerce Department readings indicate that builder confidence aligned with housing starts in November. 1.297 million housing starts were reported as compared to expectations of 1,250 housing starts based on October’s revised reading of 1.256 million starts on a seasonally adjusted annual basis. Housing starts were 3.30 percent higher month-to-month and 12.90 percent higher year-over-year. Single-family starts were 5.30 percent higher for November. Analysts said that this indicated builder confidence in single-family home building increased.

Building permits issued in November were lower than in October, but home construction slows in the winter months. 1,298 million building permits were issued in November as compared to 1.316 million permits issued in October.

Demand Pushes Pre–Existing Home Sales in November

Sales of Previously-owned Homes rose to 5.81 million sales on a seasonally-adjusted annual basis as compared to October’s reading of 5.50 million sales of previously-owned homes. Pre-owned homes sales were 5.60 percent month-to-month and 3.80 percent higher year-over-year.

The National Association of Realtors® reported increased sales of pre-owned homes in all regions except the West, where high home prices may be topping out. The Northeast reported 6.70 percent growth in sales; the Midwestern region had the highest rate of sales with growth of 8.40 percent and the South reported 8.30 percent growth in sales of previously-owned homes. The West reported a drop of -2.30 percent in sales of pre-owned homes.

Mortgage Rates, New Jobless Claims Rise

Freddie Mac reported higher average mortgage rates last week. The rate for a 30-year fixed rate mortgage was one basis point higher at 3.94 percent; the rate for a 15-year fixed rate rose two basis points to 3.38 percent. The average rate for a 5/1 adjustable rate mortgage rose three basis points to 3.39 percent. Discount points for fixed rate mortgages averaged 0.50 percent for fixed rate loans and 0.30 percent for 5/1 adjustable rate mortgages.

First-time jobless claims were higher last week with 245,000 new claims filed as compared to last week; reading of 225,000 new jobless claims and expectations of 230,000 new claims.

What‘s Ahead

This week’s economic releases include the Case-Shiller Home Price Index, pending home sales and consumer confidence. Mortgage rates and weekly jobless claims will also be released.

Last week’s economic reporting included readings on inflation, core inflation and the Post-meeting statement of the Fed’s Federal Open Market Committee. Fed Chair Janet Yellen also gave a press conference; weekly readings on mortgage rates and new jobless claims were also released.

Inflation Rises in November

U.S. inflation rose by 0.30 percent to 0.40 percent in November; October’s reading was 0.10 percent and November’s reading met analysts’ expectations. Core Consumer Price Index readings for November posted a gain of 0.10 percent, which fell short of the expected reading and October’s reading of 0.20 percent. Core CPI readings are less volatile as they do not include volatile food and energy sectors.

FOMC Statement: Fed Raises Target Rate

The post-meeting statement of the Federal Reserve’s Federal Open Market Committee cited strong economic signs in its decision to raise the target federal funds range by 0.25 percent to 1.25 percent to 1.50 percent. The Committee indicated that it expects inflation to hold steady in the near term and to stabilize closer to the Fed’s goal of two percent annually in the medium term.

Fed Chair Janet Yellen gave a press conference after the FOMC statement was released. She cited strong labor markets and low unemployment as signs of healthy economic conditions. The Fed’s dual mandate of achieving maximum employment and stable pricing has not been met due to lagging inflation. The Federal Reserve’s goal of 2 percent annual inflation fell short at 1.60 percent year-to-date. Job growth was strong with job growth expanding at a monthly average of 170,000 jobs over the past three months.

The Fed expects the inflation to achieve its 2 percent goal in 2019; unemployment is expected to remain at or near its current rate of 4.10 percent. This was good news as the expected exit of aging workers will increase in coming years as baby-boomers retire. Ms. Yellen affirmed her intention to aid in a smooth transition for the Federal Reserve as incoming Chair Jay Powell prepares to take over in February.

Mortgage Rates, Mixed, Weekly Jobless Claims

Fixed mortgage rates averaged one basis point lower last week with the rate for a 30-year fixed rate mortgage at 3.93 percent. The rate for a 15-year fixed rate mortgage averaged 3.36 percent’ the average rate for a 5/1 adjustable rate mortgages rose one basis point to 3.36 percent. Discount points averaged 0.50 percent for fixed rate mortgages and 0.30 percent for 5/1 adjustable rate mortgages. Analysts said that lenders expected the Fed to raise rates and so factored in an increase of long term loan rates over time.

New Jobless claims dropped by 11,000 last week to 225,000. Analysts had expected 235,000 new claims based on the prior week’s reading of 236,000 new claims.