Market Forecast: Case-Shiller Home Price Index, Pending Home Sales, and US Construction Spending
Mortgage rates are continuing their upward trend. The Federal Open Market Committee will meet Tuesday and Wednesday but will not hold a press conference following the meeting. This will be the last meeting with Janet Yellen as Federal Reserve Chair. Jerome Powell was confirmed as the new Federal Reserve Chair last week. The S&P CoreLogic Case-Shiller home price index comes out on Tuesday, pending home sales comes out on Wednesday, and US construction spending will come out on Thursday.
The Case-Shiller home price index tracks changes in the value of homes involved in two or more sales transactions across twenty major metropolitan areas throughout the country. The data lags by one month. In October, the seasonally adjusted index appreciated 0.7% month-over-month. Annually, the index is up 6.4%. A limited amount of for sale inventory is driving home prices up and creating a competitive market. This coupled with rising mortgage rates is making it especially difficult for first-time home buyers to enter the market.
The National Association of Realtors (NAR) releases a pending home sales index to gauge future housing activity like new home sales and existing home sales. Typically, it takes four-to-six weeks for a home under contract to close. In November, the pending home sales index improved 0.2% month-over-month to a level of 109.5. November was a strong month for housing with both new home sales and existing home sales posting strong numbers.
US construction spending tracks total construction spending on all public and private construction projects. Residential construction specifically impacts housing, but all construction activity drives economic momentum with the creation of jobs and the purchase of materials. In November, total construction spending improved 0.8% month-over-month and 2.4% year-over-year.
The Federal Open Market Committee is not likely to raise rates at this week’s meeting. Last December, the Fed projected additional rate hikes in 2017 but its officials have yet to agree on how many. Some are predicting at least three and others are suggesting there will be more. With each benchmark interest rate hike, mortgage rates tend to react. Even with additional rate hikes scheduled, rates are historically low.
Sources: Bloomberg, MarketWatch, Mortgage News Daily