Market Recap: Housing Numbers are Up and No Rate Hike, Yet
Mortgage rates did not move much this week, following the Federal Open Market Committee’s (FOMC) decision not to raise interest rates. Despite a week-over-week drop in new purchase and refinance mortgage applications, monthly housing numbers posted strong gains.
After a 2.5% decline in November, pending home sales are up 1.6% in December. The National Association of Realtors (NAR) reported gains in the South up 2.4% and in the West up 5% and declines of 1.6% in the Northeast and 0.8% in the Midwest. Discussion of “tightened inventory” came up, with NAR’s chief economist Lawrence Yun stating, “The main storyline in the early months of 2017 will be if supply can meaningfully increase to keep price growth at a moderate enough level for households to absorb higher borrowing costs. Sales will struggle to build on last year’s strong pace if inventory conditions don’t improve.”
The Case-Shiller Home Price Index for November showed a 5.3% year-over-year gain and a 0.2% increase from October. Once again, the increase was driven by gains in the Pacific Northwest, specifically Seattle, Portland, and Denver. David Blitzer, S&P Dow Jones Indices managing director and chairman of the Index Committee, said that the gains from the past two and a half years show “housing has recovered from the boom-bust cycle that began a dozen years ago.”
The FOMC met on Tuesday and Wednesday of this week. As expected, they voted to not raise interest rates. Economists predicted that the FOMC would need a better idea of the new administration’s fiscal policies before making any major interest rate moves. In the press release, the FOMC asserted that the economy “has continued to expand at a moderate pace. Job gains remained solid and the unemployment rate stayed near its recent low.”
After rapid gain toward the end of 2016, economists are predicting a steadier increase of mortgage rates throughout 2017. With tightened inventory at the center of many housing discussions, prospective homebuyers are encouraged to start looking sooner as the process may take longer.
Sources: Mortgage News Daily, Business Insider, HousingWire, Bloomberg