Mortgage Rates

Last week’s economic releases included readings on housing starts, building permits issued and the National Association of Home Builders/ Wells Fargo Housing Market Index. Fed Chair Janet Yellen testified before the House Finance Committee and consumer spending and core consumer spending reports were also released. Mortgage rates and new jobless claims were little changed week-to-week.

Home Builder Sentiment Slows as Industry Faces Obstacles

NAHB reported lower reading for its January Housing Market Index. January’s index reading was two points lower at 65 than December’s reading. Builders surveyed for the index cited ongoing shortages of buildable lots and labor, they also said that housing regulation were causing home prices to rise as new home prices are adjusted to compensate for feels associated with new construction. Any reading above 50 for the NAHB Housing Market Index is considered more positive than negative.

Builder concerns could raise additional issues for housing markets as a persistent shortage of homes for sale has driven prices up and caused fierce competition among home buyers. First-time and moderate income home buyers have been sidelined in favor of cash buyers in ultra-competitive metro areas. There was some evidence that rapidly escalating home prices may be approaching their peak. Home prices in San Francisco, California increased more slowly in recent months and were unchanged in January.

Housing Starts Lower; More Building Permits Issued

Fewer new homes were started in January as compared to December. 1.246 million homes were started in January as compared to December’s reading of 1.279 million new homes started. Winter weather can cause fluctuations in housing starts; more building permits were issued in January than for December. 1.246 million permits were issued for January as compared to December’s reading of 1.228 million permits issued.

Home builders were also concerned about rising mortgage rates as reducing affordability for would-be home buyers; Fed Chair Janet Yellen indicated in her testimony before the House Finance Committee that economic conditions are normalizing and that the Fed would likely continue to raise the target federal funds rate as economic conditions continue to improve.

Mortgage Rates Fall, New Jobless Claims /Rise

Freddie Mac reported lower mortgage rates last week. Average mortgage rates were two basis points lower at 4.15 percent for 30-year fixed rate mortgages; the average rate for 15-year fixed rate mortgages was four basis points lower at 3.35 percent. 5/1 adjustable mortgage rates were three basis points lower at 3.18 percent. Discount points averaged 0.50 percent for fixed rate mortgages and 0.40 percent for 5/1 adjustable rate mortgages.

New jobless claims were higher last week with 239,000 new claims filed as compared to an expected reading of 242,000 new claims and the prior week’s reading of 234,000 new jobless claims.

What‘s Ahead

Next week’s scheduled economic reports include readings on new and previously owned home sales and consumer sentiment index. Freddie Mac will report mortgage rates and new weekly jobless claims will be released as usual.

Last week’s scheduled economic readings were limited and included new jobless claims and Freddie Mac’s mortgage rates survey. In other news, all types of mortgage applications rose by 2.30 percent this week as compared to the prior week.

Mortgage Rates Lower, Home Loan Applications Rise

Freddie Mac reported lower mortgage rates for fixed rate and 5/1 adjustable mortgages; the average rate for 30-year fixed rate mortgages dropped two basis points to 4.17 percent. Average rates for 15-year mortgages also dropped two basis points to 3.39 percent. 5/1 adjustable mortgage rates averaged 3.21 percent, which was also two basis points lower than the previous week. Discount points averaged 0.40 percent for the three types of mortgages tracked in Freddie Mac’s weekly Primary Mortgage Market Survey.

According to the Mortgage Bankers Association, this small drop in mortgage rates caused all types of mortgage applications to rise by 2.30 percent on a seasonally-adjusted basis. Refinance applications rose two percent from the prior week, but remain 40 percent lower year-over-year. The dearth of refinancing applications was caused by two factors including many refinances were completed recently when rates were lower and homeowners currently discouraged by higher mortgage rates.

Weekly Jobless Claims Fall

Last week’s initial jobless claims fell to 234,000 as compared to expectations of 249,000 new claims and the prior week’s reading of 246,000 new claims. This was the lowest reading since 1973 and when compared to the benchmark of 300,000 new claims, shows that the economy continues to strengthen. Last week’s reading was the second lowest since recovery from the recession got underway in 2009 and represented the 101^st consecutive week that new jobless claims were lower than the 300,000 new claims benchmark. According to Labor Department data, this week’s reading sustained the longest-running consecutive period of new jobless claims below the benchmark level.

The four-week average of new jobless claims is viewed by analysts as less volatile than the week-to-week reading, but it showed similar results last week as it fell by 3750 new claims to 244,250 initial claims and reached the lowest level of new claims filed in 44 years.

What‘s Ahead

Next week’s scheduled economic releases include readings on inflation and core inflation, the National Association of Home Builders Housing Market Index and Commerce Department reports on housing starts and building permits issued.

Last week’s economic news included several good signs for U.S. Labor Markets with higher than expected readings for private and public sector job creation. The Federal Reserve announced its decision not to raise the target federal funds range, and inflation rose. Mortgage rates held steady and pending home sales rose.

Private and Public Sector Jobs Post Unexpected Gains

ADP, which tracks private-sector job growth, showed a gain of 246,000 jobs in January against expectations of 168,000 new jobs and December’s reading of 151,000 private sector jobs created. Analysts said 208,000 of jobs added were service-related jobs. January’s Non-Farm Payrolls, which is issued by the Labor Department and includes private and public sector jobs, also posted higher than expected job gains with 227,000 new jobs in January as compared to 197,000 new jobs expected and December’s reading of 157,000 new jobs. Retail, construction, financial and restaurant industries led job growth. The jump in construction hiring could indicate that home builders will expand construction in an effort to ease short inventories of homes for sale.

The national unemployment rate rose to 4.70 percent in January and matched analysts’ expectations based on December’s reading of 4.60 percent. New jobless claims were lower than expected with a reading of 246,000 new claims against expectations of 254,000 new claims and the prior week’s reading of 260,000 initial jobless claims.

Mortgage Rates Little Changed; Pending Home Sales Up

Freddie Mac reported little change in mortgage rates last week. Interest rates for 30-year fixed rate mortgages averaged 4.19 percent and were unchanged from the prior week. Rates for 15-year fixed rate mortgages rose by one basis point to 3.41 percent and the average rate for a 5/1 adjustable rate mortgage rose three basis points to 3.23 percent. Discount points averaged 0.50 percent for fixed rate mortgages and 0.40 percent for 5/1 adjustable rate mortgages.

In related news, the Federal Reserve’s Federal Open Market Committee decided not to rate the Fed’s target rate that is currently 0.50 to 0.75 percent. Fed benchmarks for the economy include an unemployment rate of 5.00 percent or lower, but the annual growth inflation benchmark of 2.00 percent has not been met. January’s inflation rate rose by 0.10 percent above December’s reading of 0.0 percent.

Pending home sales increased in January with an increase of 1.60 percent; this exceeded December’s negative reading of -2.50 percent in December. Analysts said that the growth in pending home sales, which represents sales under contract that have not closed, reflects ongoing high demand for homes. Pending sales also suggest future volume for completed sales and mortgages.

Consumer confidence lagged in January to an index reading of 111.80 as compared to an expected reading of 112.90 and December’s reading of 113.30. December’s reading was the highest in 15 years. Analysts cited post-election uncertainty as contributing to consumer concerns.

What‘s Ahead

This week’s scheduled economic reports include weekly releases on mortgage rates and new jobless claims along with readings on job openings and consumer sentiment.