Market Forecast: FHFA House Price Index, Existing Home Sales, and New Home Sales
Last week, Steve Mnuchin was sworn in as Treasury Secretary, Fed Chair Janet Yellen suggested an interest rate hike is coming soon, and mortgage rates started to rise. This week’s important housing reports will include existing home sales, new home sales, and the Federal Housing Finance Agency’s (FHFA) House Price Index.
Existing home sales, or resales, measures the sale of previously constructed homes, condominiums, and co-ops. The majority of home sale transactions are resales, so the existing home sales report is a comprehensive gauge of housing market activity. In December, existing home sales dropped -2.8% month-over-month, but improved 0.7% year-over-year.
New home sales measures the sale of newly constructed homes. New home sales improved in December to 536,000. New home sales trigger economic momentum. In addition to the home purchase, other spending on construction materials, furniture, appliances, and landscaping contributes to growth.
The FHFA house price index is a compilation of single-family home prices based on data provided by Fannie Mae and Freddie Mac. The index strictly reflects conforming conventional mortgages that have been purchased by the government-sponsored enterprises (GSE) and does not include government-insured loans. In November, the FHFA house price index increased 0.5% month-over-month and 6.1% year-over-year.
Mortgage rates were trending higher last week, following Fed Chair Janet Yellen’s monetary policy testimony. Economists have revised their outlook for a March rate hike to 35%. Even if rate remain unchanged after March’s meeting, there is still time to reach the three rate hike forecast.
Sources: MarketWatch, Bloomberg, Mortgage News Daily