18
Jan
By support
Market Outlook

What’s Ahead For Mortgage Rates This Week – January 18, 2016

Whats Ahead For Mortgage Rates This Week January 18 2016In addition to weekly reports on mortgage rates and new unemployment claims, last week’s economic news included the Fed’s Beige Book report, retail sales and consumer sentiment. January’s Empire State Index showed an unexpected dip and Consumer Sentiment increased for January.

Fed’s Beige Book Shows Diverse Economic Trends

According to the Federal Reserve’s Beige Book report for January, the central bank’s business contacts reported strength in housing, while agriculture, energy and manufacturing sectors were struggling. New York’s Empire State Manufacturing Index for January supported this trend with a sharp drop. New York manufacturing has hit its lowest level since the recession and has stayed in negative territory since March 2009. Two analysts said that the Fed’s recent rate hike and subsequent hikes could slow housing markets. Consumer lending rates, including mortgage rates, typically follow suit when the Fed increases its target federal funds rate. 

In other news, retail sales posted negative growth of -0.10 percent in December against an expected reading of -0.20 percent and November’s reading of +0.40 percent. December retail sales not including auto motive also posted a reading of -0.10 percent as compared to expectations of +0.20 percent and November’s reading of 0.30 percent.

Mortgage Rates Fall, New Unemployment Claims Rise

Last week’s average mortgage rates fell across the board according to Freddie Mac. The average rate for a 30-year fixed rate mortgage dropped by five basis points to 3.92 percent; the average rate for a 15-year mortgage rate also fell by five basis points to 3.19 percent. The average rate for a 5/1 adjustable rate mortgage was eight basis points lower at 3.01 percent. Average discount points were 0.60, 0.50 and 0.40 percent respectively.

New unemployment claims rose to 284,000 against expectations of 275,000 new claims and the prior week’s reading of 277,000 new claims. Analysts said that the jump in claims resulted from job losses related to temporary holiday positions, but noted that last year’s momentum of falling jobless claims has slowed.

Last week’s economic news ended on a positive note; consumer sentiment rose according to the University of Michigan. Lower prices were credited for the boost in consumer confidence in current economic conditions.

What’s Ahead

This week’s scheduled economic events include the National Association of Home Builders Housing Market Index, Housing Starts, Consumer Price Index and Core Consumer Price Index. No news will be released on Monday due to the Martin Luther King holiday.

17
Dec
By support
Market Outlook

Federal Reserve Raises Short-Term Interest Rates

Federal Reserve Raises Short Term Interest RatesAfter prolonged speculation by economic analysts and news media, the Federal Open Market Committee of the Federal Reserve raised short-term interest rates for the first time in seven years. Committee members voted to raise the target federal funds rate to a range of 0.25 to 0.50 percent from a range of 0.00 to 0.25 percent to be effective December 17. The good news about the Fed’s decision is that the Central Bank had enough confidence in improving economic conditions to warrant its decision. But how will the Fed’s decision affect mortgage rates?

December’s FOMC statement cited improving job markets, increased consumer spending and declining unemployment as conditions supporting the Committee’s decision to raise the target federal funds rate. While inflation has not yet reached the Fed’s goal of two percent, FOMC members were confident that the economy would continue to expand at a moderate pace in spite of future rate increases. The FOMC said that the Central Bank’s monetary policy remained “accommodative.”

Little Impact Expected on Mortgage Rates after Fed Decision

The Fed’s decision to raise short-term rates likely won’t affect mortgage rates in a big way. The Washington Post quoted Doug Douglas, chief economist at Fannie Mae: “This one change, will in the larger scheme of things, will be unlikely to make a dramatic impact on what consumers will feel.”

Mortgage rates, which are connected to 10-year Treasury bonds, may not rise and could potentially fall. While the interest rate increase could increase yields on these bonds, analysts say that multiple factors impact 10-year Treasury bonds, so a rate increase is not set in stone for mortgage rates.

Rising Mortgage Rates Would Impact Affordability and Cost of Buying Homes

Higher mortgage rates could sideline some first-time and moderate income home buyers and would also increase the long-term cost of buying a home. Interest rates on vehicle loans and credit cards are more closely tied to the Fed rate and may rise according to current and future Fed rate hikes. Rising consumer interest rates indirectly impact housing markets as prospective home buyers face higher debt-to-income ratios caused by higher interest rates on car loans and credit card balances.

During a press conference following the Fed’s announcement, Fed Chair Janet Yellen emphasized that future rate increases would be “gradual.” Chair Yellen said that the Fed’s decision reflects the agency’s confidence in an economy that is on a path of “sustainable improvement.” When questioned about inflation rates, Chair Yellen said that the Fed will closely monitor both expected and actual changes in the inflation rate.

27
Nov
By support
Market Outlook

S&P Case-Shiller: September Home Prices Gain Across U.S.

SP CaseShiller September Home Prices Gain Across US

Home prices increased across the S&P Case Shiller 20-City Home Price Index in September. According to the 20-City Home Price Index, Year-over year home price gains increased to 5.50 percent from August’s reading of 5.10 percent. 17 cities posted higher year-over0year price gains in September as compared to August.

Western cities led price gains with San Francisco, California reclaiming its lead with a year-over-year gain of 11.20 percent in September. Denver, Colorado followed with a year-over-year gain of 10.90 percent and Portland, Oregon achieved the third highest year-over-year home price gain of 10.10 percent. Phoenix, Arizona had the longest consecutive run of year-over-year price gains for ten months and had a year-over-year gain of 5.30 percent.

Month-to Month Home Prices Indicate Stronger Housing Markets

After seasonal adjustment, the 20-City Home Price Index reported a month-to-month gain of 0.60 percent in September with home price gains in 19 cities. David M. Blitzer, Chairman of the S&P Indices Committee, said that home prices are growing at more than twice the rate of inflation. While this is good news for home sellers, it also means that home buyers are finding that home prices are rising faster than other economic sectors. Rising home prices present a challenge for first-time and moderate income home buyers. First-time buyers drive housing markets as their home purchases bring new demand into the market and allow current homeowners to move up to larger homes.

Mr. Blitzer also said that in spite of widespread media coverage of the Federal Reserve’s likely plan to raise its target federal funds rate from 0.00 to 0.250 percent to 0.25 to 0.50 percent in December, the increase in the federal funds rate should not cause an major rise in mortgage rates, which are expected to stay near 4.00 percent for a 30-year fixed rate mortgage.

Based on readings for national median income, median home price and average mortgage rates, Mr. Blitzer said that affordability for homeowners within the median income range who were buying median priced homes had “slipped recently.”

Year-end reports on housing markets and general economic conditions will likely cause adjustments to forecasts for home prices and affordability. Strong labor markets may improve affordability for home buyers and the actual impact of any Fed move to raise rates will influence housing markets and home prices in 2016.