28
Jan
By support
Market Outlook

FOMC Statement: Fed Holds Steady on Rates

FOMC Statement Fed Holds Steady on RatesAccording to statement issued at the conclusion of today’s Federal Open Market Committee meeting, committee members decided against raising the target federal funds rate. Mixed economic conditions, slower economic growth in the 4th quarter and low inflation contributed to the decision against raising rates. The target federal funds rate was raised in December to a range of 0.25 to 1.59 percent after remaining at 0.00 to 0.25 percent for several years. While rising fed rates were expected to cause a hike in mortgage rates, mortgage rates fell after December’s rate hike.

Committee Cites Mixed Data in Decision

While labor conditions and housing markets continue to improve, FOMC members said that further improvement in labor markets and achieving the medium term goal of inflation influenced the committee’s decision not to raise rates. The Federal Reserve has a dual goal of achieving maximum employment and 2 percent inflation. While labor conditions continue to improve, the Committee wants to see further improvement. The inflation rate has stubbornly stayed below 2 percent and lower energy and non-energy import prices caused the inflation rate to fall further in recent weeks. The Fed also downgraded its reading of household spending and business investment growth from “strong” to “moderate.”

FOMC members consider global economic and financial conditions as well as trends and developing news affecting domestic economic and financial developments. Wednesday’s statement emphasized that constant monitoring and analysis of financial and economic readings are significant in monetary policy decisions. Analysts noted that recent economic developments including slowing economic growth in the US and China, along with resulting turbulence in financial markets likely contributed to the Fed’s decision not to raise the federal funds rate.

FOMC Says Policy Decisions to Remain “Accommodative”

Members of the FOMC do not expect marked economic improvement in the short term and said that they expect Fed monetary policy to remain accommodative “for some time.” This suggests that rapid rate hikes are not likely to occur in the near future; the Fed’s commitment to gradual rate increases is expected promote further improvements in labor markets and hold down borrowing rates for consumer credit and mortgages.

The Committee’s vote not to increase rates was unanimous. The next FOMC meeting is set for March 15 and 16. In the meantime, Fed Chair and FOMC Chair Janet Yellen is slated to testify before Congress about the economic outlook on February 10 and 11.

25
Jan
By support
Market Outlook

What’s Ahead For Mortgage Rates This Week – January 25, 2016

Whats Ahead For Mortgage Rates This Week January 25 2016Last week’s scheduled economic news included releases from the National Association of Home Builders, Housing Starts, and Existing Home Sales. Weekly reports on new jobless claims and mortgage rates were also released. 

The National Association of Realtors® reported that sales of previously owned homes rose to 5.46 million sales on an annual seasonally adjusted basis in December. This reading surpassed expectations of 5.21 million sales and November’s reading of 4.76 million sales. November’s low reading was in part affected by new mortgage rules, which delayed some closings into December. Economic factors pushing housing markets include low driven by falling fuel costs easing consumers’ budgets could provide confidence to move up to a larger home and for first time buyers to enter the market.

Existing Home Sales Up 7.6 Percent in December

There was a 3.9 month supply of pre-owned homes on the market in December; this was the lowest inventory since January 2005. High demand for homes and a slim supply of available homes continued to tighten housing markets. Growing demand for homes coupled with a shortage of homes for sale are driving up prices; the national average price of a pre-owned home rose 7.60 percent in December to $224,100. Rapidly rising home prices present an obstacle to first time buyers and as home prices rise, more buyers will face affordability concerns.

Housing Starts dipped in December to 1.15 million as compared to expectations of 1.23 million and November’s reading of 1.18 million housing starts annually. Builders constructed homes in 2015 at the highest rate since the recession. While December’s reading fell short of expectations, housing starts increased nearly 11 percent year-over-year. While builders cite obstacles such as shortages of land and labor, a growing pace of housing starts is seen as a partial solution to the shortage of available homes.

Building permits issued increased 12 percent in 2015; permits issued gauge future building activity and supply of available homes.

Mortgage Rates Fall for Third Consecutive Week

Average mortgage rates fell last week according to Freddie Mac. The average rate for a 30-year fixed rate mortgage dropped 11 basis points to 3.81 percent; the rate for a 15-year fixed rate mortgage fell by nine basis points to an average of 3.10 percent. The average rate for a 5/1 adjustable rate mortgage dropped 10 basis points to 2.91 percent. Discount points averaged 0.60, 0.50 and 0.40 percent respectively. Sean Becketti, chief economist for Freddie Mac, cited turbulence in the financial markets as a factor contributing to lower mortgage rates.

New jobless claims rose to a seven week high of 293,000 new claims as compared to expectations of 279,000 new claims and the prior week’s reading of 283,000 new claims. The four-week rolling average of new claims jumped by 6.500 new claims to an average of 285,000 claims. Lingering layoffs of temporary holiday workers were cited as contributing to higher first-time claims.

What’s Ahead

Next week’s scheduled events include data on new and pending home sales, the Case-Shiller home price indexes. The Fed will release its latest FOMC statement. Weekly reports on mortgage rates and new jobless claims will be released as usual. Reports on consumer confidence and sentiment will also be released.

20
Jan
By support
Market Outlook

Home Builders Remain Confident in January

Home Builders Remain Confident in JanuaryHome builders maintained December’s confidence level according to the National Association of Home Builders (NAHB) Housing Market Index for January. The latest reading of 60 mirrored December’s reading, but was two points lower than expected. Readings of more than 50 indicate that more builders were confident about housing conditions than those who were not.

Although January’s reading fell shy of October’s reading of 65, which was a ten-year high for the home builder index. Any reading in the low 60’s suggests gradual improvement in housing market conditions according to NAHB. While December’s year-over-year reading for new home sales was 14 percent higher than in December 2014, home builders cited industry challenges including cost of new lots and a scarce labor force. The Fed’s recent rate hike may have influenced builder confidence as higher mortgage rates would sideline some buyers.

National unemployment reached a seven-year low, which is pushing wages upward. Labor market readings are important to would-be home buyers, who typically need to be confident about jobs before investing in a home. Demand for homes continues to drive new home prices up and contributes to home builder confidence levels. The flip side of high demand is that rising home prices can price some would-be home buyers out of the market.

Components of Housing Market Index Mixed

The NAHB Housing Market Index readings are based on three components. January’s readings were mixed. Builder confidence in current market conditions rose two points to 67, but builder confidence in market conditions over the next six months slipped three points to 63. Builder confidence in buyer traffic in new home developments slipped two points to 44; this was likely due in part to winter weather.

In related news, the University of Michigan released January’s Consumer Sentiment Index last week. Consumer sentiment rose from December’s reading of 92.60 to 03.30 and surpassed the expected reading of 93.0. Low inflation drove consumer confidence according to analysts. Low wage gains were offset by falling inflation rates. Strong consumer confidence readings suggest that more home buyers could enter the market as worries about economic conditions ease.