The Home Buyer's Korner

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June 16th, 2014

What Home Buyers Need to Know for the Week of June 16, 2014

Guy looking up in color

Last week’s economic news was pretty tame for reports impacting the housing sector, but retail sales and consumer sentiment showed indications of less consumer spending and reduced consumer confidence as we move into the summer months. Consumer sentiment slipped slightly for June according to the University of Michigan Consumer Sentiment Index. June’s reading was 81.20 as compared to an expected reading of 82.80 and May’s reading of 81.50.

On Monday, James Bullard, St. Louis Fed President commented that inflation appears to be rising and we are reaching the all-important percentage of 80% for capacity utilization; where inflation becomes a concern. Inflation has been a topic of concern for the FOMC in recent years. Mr. Bullard had previously noted that inflation was stable. It will be interesting to learn the Fed’s perspective on inflation, which has been stuck below the Fed’s target level of two percent. His remarks set the stage for this week’s FOMC meeting and press conference by Fed Chair Janet Yellen. Analysts expect the Fed to continue tapering its asset purchases as it winds down its quantitative easing program. The Fed’s quantitative easing program was implemented to control long-term interest rates, including mortgage rates. Gradual tapering of this program is allowing mortgage rates to rise.

Job related reports were mixed last week. Job openings in April rose to 4.46 million, the highest reading since September 2007 and exceeded the March reading of 4.17 million. Good news came from the U.S. Labor Department, showing 4.71 million hires in April. This was the highest rate of hiring since June 2008 and represented a year-over-year increase of 6.00 percent. At the start of the recession, about 5 million job openings were reported.

Weekly jobless claims were reported at 317,000 as compared to expectations of 310,000 claims and the prior week’s reading of 312,000 claims. The four-week rolling average of new jobless claims rose by 4,750 new claims for a total of 315,250 new jobless claims. The four-week gauge of jobless claims evens out weekly volatility and is viewed by analysts as a better indicator of labor market trends.

Mortgage rates were higher according to Freddie Mac. The average rate for a 30-year fixed rate mortgage rose by six basis points to 4.20 percent with discount points rising from 0.50 to 0.60 percent. The average rate for a 15-year mortgage rose by eight basis points to 3.32 percent with discount points unchanged at 0.50 percent. The average rate for a 5/1 adjustable rate mortgage rose from last week’s reading of 2.93 percent to 3.05 percent. Discount points were unchanged at 0.40 percent.

What’s Ahead for the Week?

This week we’ll get news from the Federal Reserve meeting, the NAHB Housing Market Index housing starts for May and Jobless Claims.  Both the Federal Reserve meeting and NAHB Housing Market Index will most likely have both short and long term effects on home buyers and should be watch closely.