What’s Ahead For Mortgage Rates This Week – January 13, 2014

What’s Ahead For Mortgage Rates This Week – January 13, 2014The first post-holiday week of 2014 brought mixed economic and housing-related news. CoreLogic reported via its Housing Market Index that November home prices grew by 11.80 percent year-over-year.

This was just shy of October’s year-over-year reading of 11.90 percent. As with Case-Shiller’s recently reported Home Price Indices, a slower rate of home price growth suggested to analysts that the housing market is cooling down.

The Federal Reserve’s Federal Open Market Committee released the minutes from its December meeting. The minutes reiterated the Committee’s decision to begin tapering its asset purchases this month.

The Fed announced that it would reduce its monthly asset purchases by $10 billion to $75 billion. As always, the Fed indicated that it would continue monitoring economic data for determining future actions concerning monetary policy.

Mortgage Rates Mixed

Freddie Mac’s Primary Market Survey reported mixed results for average mortgage rates last week. The rate for a 30-yer fixed rate mortgage dropped to 4.51 percent from 4.53 percent with discount points lower at 0.70 percent; the rate for a15-year fixed rate mortgage was 3.56; this was one basis point higher than for last week.

Discount fell from 0.70 to 0.60 percent. The rate for a 5/1 adjustable rate mortgage jumped by 10 basis points to 3.15 percent with discount points unchanged at 0.50 percent.

Employment, Unemployment Data Mixed

The week’s jobs-related readings provided mixed readings for the labor sector. The ADP Employment report for December showed 238,000 private sector jobs added and matched expectations of 215,000 new private sector jobs. December’s reading also exceeded November’s reading of 229,000 jobs added.

The Bureau of Labor Statistics released the Non-Farm Payrolls report for December; it reported 74,000 jobs added in December against expectations of 193,000 new jobs and November’s reading of 241,000 jobs added.

The sharp drop in new jobs during December was partially blamed on poor weather, but analysts also said that it could be a sign of further ups and downs in the U.S. economy.

In a statement given in connection with the December Non-Farm Payrolls report, St. Louis Federal Reserve Bank President James Bullard, a member of the FOMC, said that he did not expect the Fed to stop tapering its asset purchases due to December’s sharp drop in new jobs.

The national unemployment rate improved to a reading of 6.70 percent. This was the lowest reading in five years and only two-tenths of a percent above the FOMC’s targeted unemployment rate of 6.50 percent. 347,000 workers left the workforce, which helps to explain the discrepancy between the lower number of new jobs and the lower unemployment rate.

This Week

This week’s scheduled economic news includes retail sales and retail sales except autos, the Federal Reserve’s Beige Book report, Weekly Jobless Claims, Freddie Mac’s PMMS. The NAHB Home Builders HMI and the Housing Starts report will also be released. Friday’s release of the University of Michigan’s consumer sentiment index rounds out the week.

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What’s Ahead For Mortgage Rates This Week – January 6, 2014

What's Ahead For Mortgage Rates This Week – January 6, 2014The last week of 2013 brought relatively good news in view of the economic roller coaster rides caused by legislative impasse. A brief shutdown of federal government agencies, and nail-biting suspense over if and when the FOMC of the Federal Reserve would taper its quantitative easing program.

Last week’s news was not high in volume due to the New Year holiday, but it does suggest that a general economic recovery is progressing and that housing markets are leading the “charge!”. Here are the details:

The NAR’s data of month-to-month reading of 0.20 percent showed an increase of 0.20 percent over October’s reading of -1.20 percent, which was the lowest reading for pending home sales in five months.

Lawrence Yun, chief economist for NAR, said that “…the positive fundamentals of job creation and household formation are likely to foster a fairly stable level of contract activity in 2014.”

November’s year-over-year reading for pending home sales was 101.7 against a reading of 103.3 for November 2013. The good news is that November’s reading exceeded a 10-month low of 101.50 for October 2013.

Rapid Rises In Home Prices May Have Peaked

The S&P Case-Shiller 10 and 20- city home price indices for October was released Tuesday with positive results for both indices showing year-over-year gains in average home prices at 13.60 percent.

On an un-adjusted basis, the 10 and 20 city indices each gained 0.20 percent between September and October. The indices each showed a 1.00 percent gain in home prices on a seasonally adjusted annual basis. Case-Shiller cautioned that home prices are expected to rise at single-digit rates during 2014.

Consumer Confidence Rises, Housing And Manufacturing Sectors Improve

December’s consumer confidence reading gained 6.1 points for a reading of 78.1. This also exceeded the expected reading of 76.2.

The prior two months had shown decreased in readings thought to have been caused by the government shutdown in October. Consumers indicated that they are more confident about the economy than they have been in five and a half years.

Housing and manufacturing are leading the recovery, which reflects stronger housing, production and possibly manufacturing jobs, which have lagged behind increased production.

The national unemployment rate stood at 7.00 percent last week, which remains 0.50 percent above the Federal Reserve’s targeted rate of 6.50 percent.

Weekly jobless claims came in lower than expectations of 342,000 jobless claims at 339,000 new jobless claims. The prior week’s reading showed 341,000 new jobless claims.

Although a small decrease in new claims, last week’s reading further suggested that the economic recovery is on track.

Mortgage Rates

Thursday’s mortgage interest rate survey showed incremental increases in mortgage rates; concerns over continued tapering of the Fed’s QE program may have been a factor in the slight uptick in last week’s rates.

Average rates for mortgage loans rose as follows. The rate for a 30-year fixed rate mortgage increased from 4.48 to 4.53 percent with discount points rising from 0.70 percent to 0.80 percent.

The rate for a 15-year fixed rate mortgage was 3.55 percent with discount points unchanged at 0.70 percent. The rate for a 5/1 adjustable rate mortgage rose by five basis points to 3.05 percent with discount points unchanged at 0.40 percent.

Economists seem to agree on continued improvement in the economy for 2014, however rising mortgage rates and high unemployment remain as obstacles for faster economic recovery.