The Home Buyer's Korner

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April 21st, 2014

What Home Buyers Need to Know for the Week of April 21, 2014

Guy looking up in colorLast week’s economic news impacting home affordability focused its attention on long term rising interest rates. The NAHB/Wells Fargo HMI for April ticked upward by one point to a reading of 47 against the March revised reading of 46. The home builders included in the report mentioned concerns about higher home prices, a lack of available land to development and labor shortages. Builders surveyed for the HMI were asked to rate three components used in compiling the monthly index; they include current market conditions, market conditions expected over the next six months, and buyer foot traffic in newly built homes. April’s readings were 51, 57 and 32 respectively. The current marketing conditions and buyer foot traffic were unchanged from March; however builder confidence for market conditions in the next six months rose by four points. Any reading above 50 indicates that more builders are confident about market conditions for newly-built single-family homes than not.

March Housing Starts rose by 2.80 percent at a seasonally adjusted annual rate of 946,000 starts as compared to expectations of 990,000. February’s reading of 920,000 housing starts was revised from 907,000 starts. The March reading represented a 5.90 percent decrease from March 2013, and consistent with home builder concerns reflected in the NAHB HMI for April. Building permits issued for March were also lower by 2.40 percent at a rate of 990,000 permits issued. This slippage was largely due to a falling rate of building permits issued for multi-family construction.

Higher home prices and mortgage rates along with a weak, but improving labor markets were cited for builder pessimism.

Last week’s average mortgage rates fell across the board according to Freddie Mac’s weekly Primary Mortgage Market Survey. The rate for a 30-year fixed rate mortgage fell by seven basis points to 4.27 percent. 15-year mortgages had an average rate of 3.33 percent as compared to the prior week’s reading of 3.38 percent. 5/1 adjustable rate mortgages had an average rate of 3.03 percent, down from 3.09 percent the previous week. Discount points were unchanged at 0.70, 0.60 and 0.50 percent respectively.

Federal Reserve Chair Janet Yellen struck a positive note in her speech given before the Economic Club of New York last Wednesday. Yellen indicated that the Fed and many economists expect a return to full employment and stable prices by the end of 2016. Analysts characterized Ms. Yellen’s speech as upbeat on economic recovery and inflation, while “dovish” on monetary policy. She also reiterated the Fed’s intention to monitor current and developing economic situations before making changes to its current policy on the Fed’s quantitative easing policy. She acknowledged that “twists and turns” in the economy could occur, and that Fed policy would shift as needed to address changes. The Fed also released its Beige Book Report last Wednesday and it indicated the economy is recovering in most areas of the U.S.

What’s Ahead For The Week

This week’s scheduled economic news includes, Existing Home Sales for March, FHFA House Price Index for February and New Home Sales for March. The University of Michigan Consumer Sentiment report for April finishes out the week’s news on housing.