Market Forecast: FOMC Meets, Home Builders’ Index, Housing Starts, and Building Permits
Mortgage rates trended downward last week, ahead of this week’s Federal Reserve policy meeting. The Federal Open Market Committee (FOMC) is scheduled to meet Tuesday and Wednesday and hold a press conference Wednesday afternoon. The National Association of Home Builders (NAHB) will release the home builders’ sentiment index on Thursday and housing starts and building permits come out on Friday.
According to FedWatch, the probability of a rate hike this week is at 91%. Some economists are speculating whether or not the economy has kept up with the Fed’s goals. Disappointing job reports and slowed consumer spending are leaving some to question whether or not rapid rate hikes are appropriate. In 2016, the Fed had forecast multiple rate hikes, but only raised rates once at the end of the year.
The NAHB housing market index surveys members of its organization on present sales of new homes, expected sales in the next six months, and prospective buyers’ traffic. Any reading above the threshold of 50 is considered positive. In May, the index was 70.
Housing starts and building permits are used to predict future housing market activity, specifically new home sales. Housing starts constituting ground broken on residential construction projects and building permits measure permits issued. In April, housing starts fell 2.6% and building permits dropped 2.5%.
With mortgage rates settled around year-long lows, both new purchase applications and refinance applications rebounded last week. Homebuyers and homeowners looking to refinance are locking rates ahead of additional expected rate hikes.
Sources: Bloomberg, The Economist, MarketWatch, Mortgage News Daily