Market Forecast: Housing Market Index, Housing Starts and Building Permits, FOMC Meeting
Mortgage rates did not move much last week, continuing to hover around historically low levels. The Federal Open Market Committee (FOMC) will meet Tuesday and Wednesday of this week. Some economists are suggesting a rate hike is warranted, as inflation slows and economic growth loses steam, while others predict the Fed will hold its course of leaving rates unchanged. Other important housing reports scheduled for release include the National Association of Home Builders (NAHB) housing market sentiment index, housing starts and building permits.
The NAHB housing market sentiment index is a survey of home builders’ perceptions on current sales conditions, sales expectations for the next six months, and buyer foot traffic. Any reading above 50 is considered positive. In May, the housing market index increased to a level of 66. Current sales conditions jumped to a level of 72, sales expectations for the next six months also hit 72, and buyer foot traffic ticked up to a level of 49. This year’s lower mortgage rates and slowing home price appreciation has brightened housing market expectations this year.
Housing starts track ground broken on residential projects and building permits track permits issued. Housing starts jumped 5.7% month-over-month to a seasonally adjusted annual rate of 1.24 million and building permits inched up almost 1% to a seasonally adjusted annual rate of 1.3 million. Single-family home construction powered the increase, up 6.2% to a rate of 854,000.
The FOMC meets Tuesday and Wednesday of this week. Some economists are speculating the Fed will cut rates because of weaker inflation. However, the Fed has not lowered interest rates since the economic turmoil of 2008. Since 2015, the Fed has gradually increased interest rates as the economy recovered. Typically, the Fed prefers to keep the federal funds rate between 2% and 5%.
Even if the FOMC votes to leave the federal funds rate unchanged this week, mortgage rates will likely stay low. Mortgage application submissions jumped substantially last week as home buyers and homeowners are taking advantage of lower interest rates. Getting preapproved for mortgage financing is one way to evaluate if you could benefit from a mortgage refinance and find out where you stand.
Sources: The Balance, Econoday, MarketWatch, MarketWatch, MarketWatch, Mortgage News Daily