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What’s Ahead For Mortgage Rates This Week – December 31st, 2018 Last week’s economic reports included readings from Case-Shiller Housing Market Indices, National Association of Realtors® on pending home sales and weekly readings on mortgage rates and new jobless claims.

The Commerce Department’s reading on sales of new homes was delayed due to the federal government’s shutdown.

Case-Shiller: Home Price Growth Lowest in Two Years

Home price growth was nearly nil with October’s month-to-month reading of 0.40 percent; The Case-Shiller 20-City Home Price Index showed a year-over-year home price growth rate of 5.50 percent, which matched September’s year-over-year reading. Las Vegas, Nevada led home price growth in the 20-city index with a year-over-year increase of 12,80 percent; San Francisco, California had home price growth of 7,90 percent and Phoenix, Arizona home prices grew by 7.70 percent year-over-year in October.

While San Francisco, California, Seattle, Washington and Portland, Oregon dominated the top three spots in the 20-City Home Price Index in recent years, the latest home price growth rates indicate that the West Coast may be easing off on its rapid home price gains. High-cost metro areas risk reaching a tipping point when there are few properties available with very high prices and buyers competing.

,Affordability and slim choice of available homes can cause would-be buyers to sideline themselves while they await more options and lower prices. Rising mortgage rates caused concern among buyers concerned with affordability and qualifying for mortgage loans under strict lender requirements.

Pending Home Sales Improve, But Remain in Negative Territory

Future home sales slipped in November, but less so than they did in October. Pending sales registered in negative territory with a reading of -0.70 percent in November as compared to October’s reading of -2.60 percent.

Analysts and real estate pros view pending sales as an indication of future completed sales and mortgage activity; falling numbers for pending home sales suggest slowing home sales that could impact housing markets. Pending sales are considered sales for which purchase contracts have been signed, but that have not closed.

Mortgage Rates, New Jobless Claims

Freddie Mac reported lower averaged fixed mortgage rates with the rate for a 30-year fixed rate mortgage lower by seven basis points at 4.55 percent. The average rate for a 15-year fixed rate mortgage fell by six basis points to 4.01 percent and the average rate for a 5/1 adjustable rate mortgage rose two basis points to 4.00 percent. Falling mortgage rates could induce discouraged home buyers to look for homes again.

First-time jobless claims dropped by 1000 claims to 216,000 new claims filed. Analysts predicted a reading of 217,000 mew claims filed, which was unchanged from the prior week’s reading.

What‘s Ahead

This week’s scheduled economic reports include readings on construction spending, non-farm payrolls and the national unemployment rate. Weekly reports on mortgage rates and first-time unemployment claims are also scheduled. Please note that some scheduled readings could be delayed due to the federal government shut-down.

FOMC Raises Key Rate, Forecasts 2 Rate Hikes in 2019 During its post-meeting statement, the Federal Open Market Committee of the Federal Reserve announced that its target range for the Fed’s key interest rate would increase one quarter percent to 2.25 to 2.50 percent. While this rate hike was not expected by the Executive branch, it met analyst expectations.

FOMC said in its customary post-meeting statement that members expect to make two interest rate hikes in 2019 as compared to three rate hikes in 2018 and the Committee’s original forecast of three rate hikes in 2019. Given current economic conditions, the Fed forecasted only one rate hike for 2020.

Hawks And Doves: Federal Reserve Leaders Differ On Interest Rate Projections

Six FOMC members indicated support for three rate hikes in 2019 and the FOMC statement cited a need for future interest rate hikes while some economists expected that no mention of potential rate hikes would be included in the statement. Fed Chair Jerome Powell said, “Policy at this point does not need to be accommodative. It can move to neutral.”

FOMC’s statement cited “cross currents” impacting the economy, but expects “solid growth next year, declining unemployment a healthy economy.” The Fed specifically listed strengths in labor markets, household spending and a healthy economy influenced the committee’s decision to raise the Fed’s benchmark interest rate range.

Recent volatility in global affairs and the economy prompted FOMC to say that they would be reviewing ongoing global economic and financial developments and assess their implications for the global economic outlook.

Fed Chair Jerome Powell: “Fed Is About To Embark On A Delicate Balancing Act“

Chairman Powell said that current economic conditions have helped the Fed meet its dual mandate of maintaining maximum employment and stable economic growth, for which the Fed has set a benchmark of two percent annual growth for inflation. Current inflation is lower than expected and unemployment is near record lows. The Fed faces balancing interest rate increases with closely monitoring economic “cross currents”.

Chairman Powell said the Fed expects the median rate of economic growth to slow to 2.30 percent in 2019 as compared to 2018’s rate of 3.00 percent. The National Unemployment rate is expected to fall from its current rate of 3.70 percent to 3.50 percent by the end of 2019. Mr. Powell said that no course of action is predetermined and that Fed leaders will monitor economic and global developments on an ongoing basis.

What’s Ahead For Mortgage Rates This Week – December 31st, 2018

FOMC Raises Key Rate, Forecasts 2 Rate Hikes in 2019

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