Market Forecast – FOMC Meeting, Home Builders’ Index, and Housing Starts and Building Permits
Mortgage rates started to slide back down last week after reaching year-long highs earlier in the month. The National Association of Home Builders release their housing market index for December on Thursday. Housing Starts and Building Permits are slated for release on Friday. The biggest news of the week will take place on Wednesday following the Federal Open Market Committee’s Meeting. All signs point to an interest rate hike, the FOMC has held off on hiking rates all year, and economic conditions are favorable.
The housing market index is a composite measure of new home sales, pending home sales, and prospective real estate traffic. The report determines future housing activity based on the current market. In November, the index posted 63, any number above 50 is considered a positive.
Last month, housing starts surged to a 9-year high increasing by 25.5%. Building permit issuance also rose but at a much more modest rate of 0.3%. This month’s housing starts and building permits reports will give economists an idea of what to expect heading in to 2017.
The FOMC meets on Tuesday and Wednesday and Fed Chairwoman Janet Yellen is scheduled to make an announcement Wednesday afternoon. Three regional Fed presidents spoke last week and all but guaranteed a rate hike. The FOMC has not raised rates since last December and are expected to raise the benchmark short-term interest rate by a quarter-point.
If the FOMC raises rates this week, economists are forecasting two interest rate hikes in 2017. Janet Yellen has been adamant about gradual rate increases to prevent overheating the economy. The Fed is expected to stick with this plan until the new government’s policies take shape.
Sources: Wall Street Journal, Mortgage Daily News, MarketWatch, Rob Chrisman, Business Insider, CNBC