03/05/2014
As we move into March, the housing sector has some good news to report, while other sectors are struggling. Read on to learn the latest details, and what they mean for home loan rates.
Despite the harsh weather, new home sales rose by 9.6 percent from December to January to an annual rate of 468,000, well above expectations and the highest level since July 2008. Pending home sales for January also came in just above expectations and well above December’s reading. In addition, research firm CoreLogic reported that completed foreclosures fell by 19 percent from January 2013 to January 2014, while the Case Shiller 20-city Home Price Index ended its best year since 2005.
On the other end of the spectrum, 2013 fourth quarter Gross Domestic Product (GDP) fell to 2.4 percent, sharply beneath the 4.1 percent recorded in the third quarter of 2013. The decline was due in part to consumer spending and exports that were less robust, signaling that U.S. economic growth remains choppy. However, there was some good news in the report as company spending was revised up sharply, suggesting an improvement in business conditions.
In labor market news, weekly initial jobless claims rose by 14,000 in the latest week, reaching a one-month high as the job markets continue their up and down pattern.
What does this mean for home loan rates? Remember that the Fed is now purchasing $35 billion in Treasuries and $30 billion in mortgage bonds (the type of bonds on which home loan rates are based) to help stimulate the economy and housing market. This is down from the original $85 billion per month that the Fed had been purchasing. With the December and January job creation numbers below expectations, the Fed will be looking closely at February’s numbers for any signs of a pattern. If this report and other key economic data points are weak, the Fed may have to rethink the tapering it has begun. This story is sure to impact the markets and home loan rates as we move ahead in 2014.
