Voted Best Real Estate Company in SLO County in the 2017 New Times Reader Poll
No Comments

CCL Market Update: Housing Market, Jobless Claims, Federal Open Market Committee Meeting, Mortgage Rates

Housing market data for September continues to make builders more and more optimistic. The housing market index rose 1 point in the month to 62, from 61 in August, keeping readings at or near 10-year highs. Traffic, which is general the weakest component of the index, increased by 2 points to 47, suggesting that high rental prices may be pushing potential first-time buyers into the market. The other components of the report also displayed strong numbers, with the current sales index up 1 point to 67, and future sales down 2 points to a still-strong 68. A smaller supply of new homes, low interest rates, and improving traffic are all important factors that are positively affecting the housing market.

Total housing starts for August came in lower than expected, falling 3.0% to a 1.126 annual pace. When broken down, single-family home starts also fell 3.0% in the month, following the 10.9% surge in single-family starts in July. The number of permits pulled ahead, up 3.5% in August to a higher-than-expected 1.170 million. Permits for single-family homes rose 2.8% to 699,000, the highest since 2008. This improvement is yet another positive for housing, which is proving to be a stronghold for the 2015 economy.

Jobless claims continue to be at record lows, with initial claims for the week of September 12 falling 11,000 to 264,000, one of the lowest readings of the last 40 years. The September 12 week is the sample week used for the monthly employment report, and is 13,000 lower than the August sample week, which points to improvement in the labor market and further strength for the September employment report. The 4-week average came in at 272,500, abd is about even with the month-ago comparison. Continuing claims from the week of September 5 also decreased, down 26,000 to 2.237 million, and the 4-week average dropped 5,000 to 2.256 million.

The Federal Open Market Committee meeting for September recently took place, and voted not to change policy, and therefore not to implement a rise in rates at this time. In the meeting announcement, improvement in the labor market is described as “solid” with inflation expected to remain near recent lows before gradually moving to 2%. Fed chair, Janet Yellen stressed that inflation is still “quite low” and is “way below target” due in part to weakness of foreign economies, which seem to be “restraining” economic activity. Now 13 of 17 committee members see the eventual rate hike coming by the end of the year, down from 15 of 17 members in the previous meeting. This tells that it is still very likely that there will be a rate hike this year, but it just isn’t here yet. Yellen did confirm that the October meeting will be “live,” and that if a rate hike is approved, the Fed will announce an unscheduled press conference.

Mortgage Rates

Mortgage rates for most loan programs displayed slight increases over the past week. All mortgage rate increases were right around 10 basis points or less, the largest being a 0.113% rise in 30-year USDA rates and the smallest a 0.007% increase in 30-year manufactured conventional rates. The 15-year conventional and 30-year high balance loan programs both displayed no rate movement within the week. 30-year fixed conventional rates rose 10.2 basis points back up to the 4.000% mark (4.040% APR), and is still about 1/8 percentage points lower than the year-ago rate of 4.250% (4.264% APR). Although there was upward movement for many of the rate programs, it was very slight across the board.

Sean Becketti, chief economist for Freddie Mack, commented on the slow-moving rates, focusing on how a future rise in rates will impact average Americans:

“Inflation fell shy of expectations in August, up 0.2 percent over the past year, but core consumer prices increased 1.8 percent year-over-year. Low mortgage rates help to support housing markets, which continue to bring good news. The National Association of Home Builders’ HMI came in above expectations at 62, which is a ten year high.”

“Even if the Fed decides to raise short-term interest rates, we don’t expect a significant impact on the housing market. We’re still on track for the best year of home sales since 2007. And in contrast to two years ago, when mortgage rates spiked in response to the Taper Talk, the economy is in much better shape and markets have been expecting the Fed to act for months. While our outlook incorporates a moderate increase in mortgage rates over the next 18 months, rates are likely to remain low by historical standards and should not be a determining factor for most Americans looking to purchase a home.”

“Freddie Mac is keenly aware though that any rate increase will have a larger impact on low-to-moderate income families looking to finance a home purchase. We introduced our low down payment program, Home Possible Advantage, specifically to address the challenges faced by these households.”

As mortgage rates remain relatively low, consider taking action on your home purchase or refinance. Call the Mortgage Experts at 805.543.LOAN for your personalized consultation and rate quote today!

Written by Central Coast Lending - Go to Central Coast Lending's Website/Profile