Market Update: Rates Rise; Case-Shiller Home Price Index, New Home Sales, and Fed Interest Rate Decision Coming Up This Week

Blog posted On January 24, 2022

Mortgage rates trended upward last week as the bond market continued adjusting to the Federal Reserve’s asset tapering plan. In December, the Federal Open Market Committee (FOMC) announced that it was speeding up its asset tapering in hopes of concluding the process in March. Soon after, the Fed will likely begin raising the benchmark interest rate. Right now, many traders are preparing for the eventual shift.

This week, the Federal Open Market Committee (FOMC) will meet again and announce its interest rate decision. On Tuesday, the Case-Shiller home price index will be released. On Wednesday, the new home sales report is also scheduled for release.

The S&P Case-Shiller home price index tracks changes in the value of homes involved in two or more sales transactions across 20 major metropolitan areas throughout the country. Though the data lags by a month, it is still used to gauge home price appreciation trends. In October, the 20-city Case-Shiller home price index rose 0.9% month-over-month and 18.4% year-over-year. Both increases were at a slower pace than the month before.

The Federal Open Market Committee (FOMC) sets the federal funds rate. The federal funds rate will influence mortgage rates but not set them exactly. When the Fed raises rates, mortgage rates typically go up. When the Fed lowers rates, mortgage rates typically go down. In December, the Fed voted to leave the benchmark interest rate unchanged but decided to speed up its asset tapering plan. With the high levels of inflation, the Fed is taking swift action. Many economists expect a rate increase as soon as March. 

The new home sales report tracks the sales of newly constructed homes and accounts for about 10% of total residential real estate transactions. In November, new home sales jumped 12.4% month-over-month to reach a seasonally adjusted annual rate of 744,000. The median sales price for a new home was $416,900. The supply of new homes was at a seasonally adjusted annual rate of 402,000.

Also scheduled for release this week is the FHFA home price index, the weekly mortgage application submissions, jobless claims, the fourth quarter GDP estimate, pending home sales, the PCE index, personal income, and consumer spending.

With mortgage rates already on the rise from their record lows last year, it may be a good time to explore your refinance opportunities. To compare different refinance scenarios, check out our refinance calculator.

Sources: Bloomberg, Census, CNBC, Mortgage News Daily, Mortgage News Daily, S&P Global