Interest Rates

Home mortgage rates slipped to their lowest rates on record as uncertainty over the coronavirus continued to impact financial markets. Freddie Mac reported lower average mortgage rates for fixed and adjustable-rate mortgages.

Rates for 30-year fixed-rate mortgages fell by 16 basis points to 3.29 percent; the average rate for 15-year fixed-rate mortgages was also 16 basis points lower at 2.79 percent.

Mortgage rates for 5/1 adjustable-rate mortgages were two points lower on average at 3.18 percent. Discount points averaged 0.70 percent for fixed-rate mortgages and 0.20 percent for 5/1 adjustable rate mortgages. The 10-Year Treasury Yield, which tracks with mortgage rates, slipped to 0.90 percent last week; this was the first time the yield rate fell below one percent.

Homeowners rushed to take advantage of low mortgage rates through refinancing, but homebuyers could not gain the same benefits from record-low mortgage rates due to persistent shortages of available and affordable homes for sale. Analysts advised against waiting to refinance as home mortgage rates aren’t expected to fall much lower.

Construction Spending Rises, Fed Cuts Key Rate as National Unemployment Rate Falls

Analysts have long relied on home builders to ease chronically short supplies of homes for sale. Construction spending rose to 1.80 percent in January as compared to December’s rate of  0.20 percent. Analysts expected January’s construction spending to rise to 0.90 percent.

The Federal Reserve cut its target federal funds rate range by 0.50 percent to 1.00-1.25 percent.in a move to relieve the impact of the coronavirus outbreak on the economy. The Fed may cut its key rate by an additional  0.25 percent  when the central bank’s Federal Open Market Committee holds its scheduled meeting on March 17-18^th.

Labor-sector reports showed mixed results for job growth. The government’s Non-Farm Payrolls report showed 273,000 public and private-sector jobs added in February, this pace was unchanged from January. ADP reported 183,000 jobs added in February as compared to 209,000 jobs added in January.

First-time unemployment claims fell to216,000 claims filed from the prior week’s reading of 219,000 new claims filed. Analysts expected 217,000 new claims filed. The national unemployment rate dropped to 3.50 percent in February as compared to January’s reading of 3.60 percent.

What’s Ahead

This week’s scheduled economic news includes readings on inflation and consumer sentiment. Weekly readings on mortgage rates and new jobless claims will also be released.

Economic readings released last week included Case-Shiller and FHFA Home Price Indices and reports on new and pending home sales. The week wrapped up with a report on consumer sentiment and weekly readings on mortgage rates and new jobless claims.

Case-Shiller, FHFA Report Faster Home Price Growth

Home prices rose by 3.80 percent year-over-year in December according to Case-Shiller’s National Home Price Index. Case-Shiller’s 20-City Home Price Index rose by 2.90 percent year-over-year in December as compared to November’s reading of a 3.50 percent gain over-over-year; Case-Shiller reported 0.40 percent growth in home prices from month-to-month.

The 20-City Home Price Index reported no change in the top three cities for year-over-year home price growth. Phoenix, Arizona reported 6.50 percent home price growth in December followed by Charlotte, North Carolina’s reading of 5.30 percent home price growth. Tampa, Florida reported 5.20 percent year-over-year home price growth.

The Federal HousingFinance Agency reported its 34^th consecutive quarter of home price growth in December. Home prices rose by 5.10 percent in the fourth quarter of 2019 and were 0.60 percent higher month-to-month.

2019 saw home buyers leave pricey coastal metro areas in favor of less expensive markets in mountain states and in the South. Home prices in these areas rose as demand increased. Overall, real estate pros reported lingering shortages of homes for sale in many areas, but low mortgage rates prompted would-be buyers to enter the market. Increased demand for homes further boosted home prices in many areas.

Mortgage Rates Fall as New Jobless Claims Rise

Freddie Mac reported lower mortgage rates last week as 30-year fixed mortgage rates dropped four basis points to 3.45 percent. The average rate for a 15-year fixed-rate mortgage was also four basis points lower at 2.95 percent. Rates for 5/1 adjustable rate mortgages averaged 3.20 percent and were five basis points lower.

Discount points averaged 0.70 percent for 30-year fixed-rate mortgages and 0.80 percent for 15-year fixed-rate mortgages. Discount points for 5/1 adjustable rate mortgages averaged 0.20 percent.

First-time jobless claims rose last week; 219,000 new claims were filed and exceeded expectations of 214,000 claims and the prior week’s reading of 211,000 first-time claims filed.

New and Pending Home Sales Increase in January

764,000 new homes were sold in January on a seasonally-adjusted annual basis according to the Commerce Department. Analysts expected 722,000 new home sales based on December’s reading of 708,000 new homes sold. Low mortgage rates boosted sales as buyers turned to new home developments to take advantage of rock-bottom mortgage rates.

Pending home sales rose 5.20 percent in January as compared to a dip of -4.30 percent in December according to the National Association of Realtors®. Pending home sales were 8.70 percent higher in the South and 7.10 percent higher in the Midwest. Pending sales rose by 1.20 percent in the Northeast and fell 1.10 percent in the West.

The University of Michigan reported slight growth in consumer sentiment in February with an index reading of 101.0 as compared to January’s reading of 100.9. Analysts expected no change from January’s reading.

What’s Ahead

This week’s scheduled economic news includes readings on construction spending and labor sector reports on public and private-sector job growth and the national unemployment rate. Weekly readings on mortgage rates and new jobless claims will also be released.