Market Recap: Case-Shiller Index Appreciates, Pending Home Sales and Construction Spending Up
Mortgage rates did not move much in either direction this week, after the previous week’s upward trend. The Federal Open Market Committee (FOMC) met Tuesday and Wednesday, and as expected voted unanimously against a rate hike. In housing news, home values continue to appreciate, the pending home sales index increased for the third month in a row, and US construction spending was strong.
The S&P Case-Shiller home price index reports on the change in value of homes involved in two or more sales transactions in twenty major metropolitan areas across the United States. Home price appreciation has been on an upward trend as limited "for sale" inventory pushes prices up. In November, home prices increased 0.7% month-over-month and 6.2% year-over-year. Gains were driven by Seattle, up 12.7% annually and Las Vegas, up 10.6% annually, followed by San Francisco, up 9.1% annually. Price gains are likely to continue as inventory creation fails to outpace supply.
The pending home sales index measures homes that are under contract but not yet closed. Typically, it takes four-to-six weeks for a contract to close. The pending home sales index is used to predict future housing activity. In December, pending home sales increased 0.5% month-over-month to a level of 110.1. National Association of Realtors (NAR) chief economist Lawrence Yun explained, “Jobs are plentiful, wages are finally climbing, and the prospect of higher mortgage rates are perhaps encouraging more aspiring buyers to begin their search now.”
US construction spending counts total spend on private and public construction projects. Though residential construction specifically affects the housing market, all construction activity drives economic momentum with the creation of jobs and the purchase of materials. In December, construction spending strengthened, up 0.7% month-over-month and 2.6% year-over-year to an annual rate of $1.25 trillion. Residential spending increased, but spending on public projects like power, highway, and infrastructure declined.
The FOMC hosted its last meeting with Janet Yellen as Federal Reserve Chair. The Fed unanimously voted against a rate hike but suggested that strengthening inflation and a strong labor market could warrant further rate hikes this year. Tomorrow, Jerome Powell will officially take over as the Federal Reserve Chair. The Fed is likely to maintain similar economic policy under Powell, however with Yellen’s resignation and others, several seats will be open and available.
Sources: Bloomberg, CNBC, MarketWatch, MarketWatch, Mortgage News Daily