The Home Buyer's Korner

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September 22nd, 2014

What Home Buyers Need to Know for the Week of Sept 22, 2014

The Home Buyer's Korner LogoLast week we got a lot of economic news, but the focus mostly was on the Federal Reserve’s FOMC meeting statement and a post-meeting conference given by Fed Chair Janet Yellen. The FOMC statement indicates to point out the Feds winding-down of Treasury and Mortgage-Backed Securities purchasing scheduled to end next month.

The FOMC statement pointed out that committee members feel the economy is improving at a moderate pace and strong enough to further reduce the QE3 monthly asset purchases. The Fed further pointed to its desire to sustain a dual mandate of maximum employment and an inflation rate of 2.00 percent.

While the unemployment rate is lower than the Fed’s benchmark of 6.50 percent, FOMC members cited concerns that the labor force is underutilized and while labor markets are recovering; could use further improvement.

The Fed repeated its customary statement that the its monetary policies are not on a pre-determined course and FOMC members continually review and interpret developing financial and economic news as part of their decision-making process.

Chair Yellen explained during her press conference that it’s not possible to provide a specific date when the Fed will change its target federal funds rate. While, economists expressed concerns that raising the target federal funds rate; currently at 0.00 to 0.250 percent could cause overall interest rates to rise. Chair Yellen said that she expects the current target federal funds rate to remain for a “considerable time” after the QE asset purchases cease.

The National Association of Home Builders Housing Market Index rose by three points in September to a reading of 59. Analysts had predicted an index reading of 56 against August’s reading of 55. September’s reading was the third consecutive reading above 50. Stronger labor markets were cited as supporting the higher reading. Any reading above 50 indicates that more builders perceive market conditions for new homes as positive as those that do not.

August’s housing starts were inconsistent with the Home Builders Index however; according to the Department of Commerce, construction of new homes fell by 14.4 percent from July’s reading to 956,000. Analysts expected 1.03 million starts against July’s reading of 1.12 million homes started.

Freddie Mac reported higher mortgage rates last week. Average mortgage rates rose on all programs with rates for a 30-year fixed rate mortgage 11 basis points higher at 4.23 percent. The rate for a 15-year mortgage also rose by 11 basis points to 3.37 percent and the rate for a 5/1 adjustable rate mortgage rose from 2.99 to 3.06 percent. Average discount points were unchanged for all mortgage types at 0.50 percent.

New weekly jobless claims dropped to 280,000 against an expected reading of 305,000 and the prior week’s adjusted reading of 316,000 claims. The original reading for the prior week was 315,000 claims. The less volatile four-week average of new jobless claims fell by 4,750 new claims to a reading of 299,500.

What’s Ahead

This week well get news and reports from The National Association of REALTORS® with its Existing Home Sales report for August. Case-Shiller’s Monthly Housing Market Index and the FHFA’s Home Value Report will provide us with current market trends. The Department of Commerce will release its New Home Sales Report and we’ll see where Average Mortgage Interest Rates are with Freddie Mac’s weekly report.