The Federal Open Market Committee recently released the minutes from their latest meeting, along with a statement implying that a rate hike is now on the table at every meeting. They inferred that the probability of a rate hike will depend on how strong employment growth remains and whether inflation starts to show some pressure. The meeting minutes tended to highlight the current economic positives, such as favorable consumer spending, low interest rates, and rising household income. Consumer confidence was also included as a positive factor, but with the recent drop in the consumer sentiment index, that may no longer be the case. For now, the Fed seems to be continuing with its “wait-and-see” policy.
Housing starts increased by 20.2% in April to a higher-than-expected annual rate of 1.135 million, and permits also surpassed expectations with a 10.1% increase to 1.143 million. Both housing starts components displayed positive movement in April, with a 16.7% rise in single-family starts to 0.733 million, and a 27.2% rise in multi-family starts to 0.402 million.
Existing home sales did not follow the same suit, with a drop of 3.3% in April to a 5.04 million annual rate. Nevertheless, year-over-year sales of existing homes are still up 6.1%. A positive within the existing homes report is the rise in supply in the market. There were a total of 2.21 million used homes on the market in April, up from 2.01 million in March. Also a positive factor, the median price rose by 4.1% (8.9% year-on-year) to $219,400.
Jobless claims continue to remain at notably low levels, although initial claims did rise by 10,000 to 274,000 in the May 16 week. This increase followed 3 straight weeks in the low-to-mid 260,000 range, which is the lowest trend for initial claims since 2000. The 4-week average is down for the 4th straight week with a 5,500 drop to 266,500, more than 20,000 below the month-ago comparison. Continuing claims data, which lags a week, displayed a drop of 12,000 in the week of May 9 to a 2.211 million level. The 4-week average for continuing claims also decreased, down 29,000 to 2.230 million, adding to the list of positive employment readings, which are some of the best in 15 years.
Mortgage Rates
Mortgage rates displayed slight increases over the past week. The 30-year Jumbo showed the largest increase within the conventional loan programs, going from a 4.250% (4.284% APR) rate to 4.375% (4.399%) for an increase of 115 basis points. Apart from the 30-year High Balance, which saw no change, the lowest conventional increase was in the 30-year Conventional program, which saw a rise of only 5 basis points since May 14.
Government mortgage rates also displayed small increases, with the exception of the 30-year FHA, which remains unchanged for the 12th consecutive week. The remaining government loan programs (FHA 203k, Manufactured FHA, VA, USDA) seem to have returned to close to the same rate levels as those presented approximately two weeks prior.
Freddie Mac’s Primary Mortgage Market Survey released on May 21 reported that national mortgage rates are little changed since the last reading. The 15-year conventional averaged 3.05%, slightly down from last week’s rate of 3.07%. The 30-year conventional averaged 3.84%, up only 1 basis point from last week’s 3.85% rate, and decently lower than the year-ago rate of 4.14%.
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