Usually, the release of the Fed Minutes is a minor affair, however, last week was a different story as markets try and figure out what the Fed’s next moves are going to be. Not too long ago, traders expected the Fed to start cutting rates at their March meeting, which could have helped mortgage rates improve as we head into the spring home buying season.
But as we know, the health of the economy and inflation has proven hard to predict lately. And in the Minutes released last week, Fed Chair Powell made it clear that a rate cut was unlikely as inflation remains pesky and a resilient economy keeps mortgage rates climbing.
Freddie Mac’s latest survey of average mortgage rates showed rates ticked higher again this past week for both the 15-year and 30-year fixed rates. On the bright side, the rate for the average 30-year fixed mortgage sits dead center between the 52-week high and low. So, although it might feel like lots of changes in rates they’re holding at the center point for now, of course, they can change at any time.
The 10-year Treasury Note has remained above the important 4 percent yield, holding steady around the 4.32 percent yield. If it can hold at that level or below it will help keep rates from moving meaningfully higher. However, the opposite is true as well.
As for what I’m watching this week…
Based on what I reported above, the highest impact report of the week comes on Thursday with the Fed’s favorite inflation reading, the PCE Index. Inflation readings for January are expected at monthly increases of 0.3 percent overall and an overheated 0.4 percent for the core. Annual rates are expected at 2.4 percent overall and 2.8 percent for the core. Remember, the Fed’s target with raising or cutting rates is to get this annual rate between 1-2 percent. Any surprises with this report could kick up increased volatility in markets.
New Home Sales rose modestly, by 1.8 percent from January, and not as much as predicted to 661K when 685K was predicted. What I found most interesting was the median price for new houses sold in January was $420,700, while the average sales price was reported at $534,300! Also, interestingly, inventory levels of new homes look great at 8.3 months, which signals a balanced market between supply and demand. A balanced market is great for buyers and sellers alike!
And, the leading indicator for home sales numbers, the Pending Home Sales Index, is predicted to show pending sales in January are expected to rise a further 0.8 percent after December, in which the index jumped a surprising 8.3 percent.
On Tuesday, we learned that home prices continue to rise in 96 out of the 100 largest metro areas, according to the Case Shiller Home Price Index. Home prices remain resilient even with mortgage rates what they are because of the pent up demand from buyers that continue to enter the market. We continue to see mortgage applications rising so buyers are showing they’re ready to make their moves, even if affordability isn’t what it was two or 3 years ago.
If you’re interested in exploring your next purchase or refinance, reach out to me, and let’s discuss your best scenario. Simply send me an email and let me know you’d like to talk about your plans, or call/text me directly at 818.307.6072.
