Market Forecast: Housing Market Index, Existing Home Sales, and FOMC Meeting
Mortgage rates have trended downward this month, amid notes from the minutes from the last Federal Open Market Committee (FOMC) meeting in January. This week, the FOMC will meet on Tuesday and Wednesday, but is not expected to raise the Federal benchmark interest rate. In housing news, the housing market index comes out on Monday and existing home sales will be released on Friday.
The National Association of Home Builders’ (NAHB) housing market index is based on a survey of builder sentiment surrounding current sales conditions, sales expectations for the next six months, and buyer foot traffic. Any reading above 50 is considered positive. In February, the NAHB housing market index exceeded expectations reaching a reading of 62. Current sales conditions increased to a level of 67, sales expectations for the next six months jumped to 68, and buyer foot traffic improved to a level of 48. Lower mortgage rates in January have spurred builder optimism.
Existing home sales or resales make up the majority of real estate transactions. Existing home sales declined in January, down 1.2% month-over-month to a seasonally adjusted annual rate of 4.94 million units. Annually, sales were down 8.5%. At this pace, it would take 3.9 months to exhaust all available inventory, up slightly from 3.7 months in December, but still well below the six months’ supply considered a balanced market.
The FOMC will meet on Tuesday and Wednesday of this week, their second meeting of 2019. Federal Reserve Chair Jerome Powell appeared on 60 Minutes earlier this month to discuss monetary policy and the Fed’s course of action. Regarding the criticism he’s faced from President Trump, Powell stated, “the law is clear that I have a four-year term, and I fully intend to serve it.” The FOMC raised the federal benchmark interest rate four times in 2018, following former Federal Reserve Chair Janet Yellen’s course toward policy normalization. After some recent economic slowdown, specifically less job creation and lower consumer spending, the Fed may be projecting less interest rate hikes this year.
President Trump has been vocal about his opposition to raising interest rates too rapidly. During his 60 Minutes interview, Chair Powell said of the FOMC, “we are directed to execute policy in a strictly nonpolitical way, serving all Americans, and that’s what we do. We are independent in that sense.” Any rate hike decisions will eventually impact mortgage rates, though the effect tends to be gradual.
Sources: CNBC, CNBC, CNBC, Econoday, FederalReserve.gov, MarketWatch, Mortgage News Daily