This Week's Mortgage Forecast
LAST WEEK IN REVIEW
"Winter is coming." George R.R. Martin. Winter has long arrived in many parts of the country, and it is being cited as a reason for several weaker than expected economic reports. Read on for details, and what they mean for home loan rates.
After making important improvements last year, the housing sector has struggled of late. January Housing Starts declined by 16 percent from December, and have been declining since November's annual rate of 1.101 million, which was the highest since 2008. Building Permits, a sign of future construction, also fell 5 percent in January from December, while Existing Home Sales declined by 5.1 percent.
In addition, the National Association of Home Builders Housing Market Index came in at 46, the lowest reading since last May. Readings over 50 indicate that more builders view conditions as good, rather than poor. The NAHB said that weather conditions across the country led to a decline in buyer traffic last month.
In the manufacturing sector, both the Empire State Manufacturing Index and the Philadelphia Fed Index fell in February, coming in well below expectations. The labor market is also struggling, as Weekly Initial Jobless Claims came in at 336,000 and continue to hover around this number. Meanwhile, inflation at both the consumer and wholesale level remains tame.
What does this mean for home loan rates? Remember that the Fed is now purchasing $35 billion in Treasuries and $30 billion in Mortgage Bonds (the type of Bonds on which home loan rates are based) to help stimulate the economy and housing market. This is down from the original $85 billion per month that the Fed had been purchasing. The minutes from the Fed's recent meeting of the Federal Open Market Committee revealed a lack of consensus on this topic. If economic data continues to be weak, the Fed may have to rethink the tapering it has begun. This will be a key story that could impact the markets and home loan rates in the weeks and months to come.
The bottom line is that now remains a great time to consider a home purchase or refinance, as home loan rates remain attractive compared to historical levels.
FORECAST FOR THE WEEK
The economic calendar is busy this week with several housing reports front and center.
- Look for the S&P/Case
Shiller Home Price Index on Tuesday, New Home Sales on
Wednesday, and Pending Home Sales on Friday.
- We'll get a read on consumer
attitudes with Consumer Confidence on Tuesday and the Consumer
Sentiment Index on Friday.
- As usual, Weekly Initial
Jobless Claims will be reported on Thursday.
- Thursday also brings January's Durable
Goods Orders, which are orders for items that last for an extended
period of time.
- On Friday, look for the second
reading of Gross Domestic Product for the fourth quarter of 2013,
as well as Chicago PMI, a key manufacturing report.
Remember: Weak economic news normally causes money to flow out of
Stocks and into Bonds, helping Bonds and home loan rates improve, while strong
economic news normally has the opposite result. The chart below shows Mortgage
Backed Securities (MBS), which are the type of Bond on which home loan rates
are based.
When you see these Bond prices moving
higher, it means home loan rates are improving — and when they are moving
lower, home loan rates are getting worse.
Economic Calendar for the Week of Feb 24 - Feb 28
Economic Calendar for the Week of Feb 24 - Feb 28
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