The Home Buyer's Korner

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June 23rd, 2014

What Home Buyers Need to Know for the Week of June 23, 2014

Guy looking up in colorLast week’s leading news came from the Federal Open Market Committee, National Association of Home Builders Wells Fargo Housing Market Index, and the Jobs Report.

FOMC members reduced the Fed’s monthly asset purchases by $10 billion, for a monthly volume of $35 billion in Treasury and Mortgage Backed Securities, noting concerns that inflation has not yet reached the committee’s benchmark of 2.00 percent, as a benchmark of economic recovery

The minutes reflected FOMC’s position that it will maintain the target federal funds rate at between 0.00 and 0.25 percent for a considerable period after the asset purchases under the quantitative easing program (QE3) ends. While analysts previously associated “considerable period” with a time frame of six months, Fed Chair Yellen stated during her press conference that there was no formula for determining the Fed’s actions; she emphasized that the Fed and FOMC would monitor a wide range of economic indicators, economic reports and developments in support of any decisions to change current monetary policy. In response to a question about tight credit, Chair Yellen cited banks’ reluctance to lend to all but those with “pristine” credit scores as a factor contributing to slower recovery in the housing sector.

When NAHB released its Housing Market Index Report, we saw it had reached its highest reading in five months. The index moved up from 45 to 49; noting that a reading of 50 indicates that more builders are confident about housing market conditions than those who are not. David Crowe, NAHB chief economist, said that builder confidence is in line with consumer confidence, but would be home shoppers are waiting for a stronger economic recovery before buying, while builders aren’t building more than markets will bear. Warmer weather was expected to add to the pace of housing starts, but it hasn’t shown up in any reliable data yet.

According to the latest figures from the Department of Commerce, May housing starts fell to 1.00 million from April’s reading of 1.07 million on a seasonally adjusted annual basis, and missed the consensus reading of 1.02 million. Building permits issued in May fell by 6.40 percent to 991,000 permits issued for single and multi-family construction.

In recent months, permits for single family homes have fallen, while permits for multi-family units increased. This concerns economists and presidential nominee for HUD Julian Castro as single-family homes generate sales of retail goods including furniture; appliance, home improvement supplies and more, while multi-family housing is often occupied by renters and yields fewer home related purchases.

New jobless claims were higher than expected at 312,000; analysts had predicted a reading of 310,000 against the prior week’s reading of 318,000 new claims.

Freddie Mac reported lower mortgage rates Thursday. The 30-year fixed rate mortgage was 4.17 percent; a decline of three basis points and discount points were lower at 0.50 percent. The average rate for a 15-year fixed rate mortgage was lower by one basis point at 3.30 percent and discount points were unchanged at 0.50 percent. The average rate for a 5/1 adjustable rate mortgage fell to 3.00 percent from last week’s reading of 3.05 percent, while discount points remained unchanged from last week at 0.40 percent.

What’s Ahead for the Week?

This week’s we’ll see Existing Homes SalesNew Homes Sales, FHFA Home Prices for April, Case-ShillerFreddie Mac’s Weekly Mortgage Rates Survey, Jobless Claims and Consumer Sentiment for June.