“This could be the start of something new.” (Vanessa Hudgens and Zac Efron) Would-be buyers may have been looking for new homes in January, but some were likely thwarted by a lack of inventory.
Rising home loan rates coupled with a lean supply of homes for sale on the lower-end of the market pushed sales of new single-family homes lower in January. New home sales fell 7.8 percent in January from December, according to the Commerce Department, led by a 33 percent plunge in the Northeast and a near 15 percent decline in the South. However, gains were seen in the Midwest and West. From January 2017 to January 2018, sales were down 1 percent.
Home prices continued to rise in December due in part to the continuing themes of high demand and a shortage of homes for sale on the market. The S&P/Case-Shiller 20-City Home Price Index rose 6.3 percent from December 2016 to December 2017. Prices were up 0.6 percent from November to December.
In other economic news, the second reading on fourth-quarter 2017 Gross Domestic Product was in line with expectations at 2.5 percent. The Consumer Sentiment Index hit its second highest level since 2004 in February and comes after the strong Consumer Confidence data for February earlier in the week. Fears of higher inflation were somewhat laid to rest, at least for the moment, as the annual Core Personal Consumption Expenditures showed inflation remains tame. Year-over-year Core PCE was unchanged in January, coming in at 1.5 percent, still well below the Fed’s target of 2 percent.
Speaking of the Fed, newly-appointed Fed Chair Jerome Powell testified in front of Congress Tuesday and sent a chill throughout the U.S. markets when he signaled there could be a faster pace of hikes to the Fed funds rate this year. This is the rate at which banks lend money to each other overnight, and it does not directly impact home loan rates. However, if inflation remains tame it is possible the Fed will rethink its plan.
Volatility continued to grip the markets in the latest week, especially after President Trump announced the U.S. will impose tariffs on steel and aluminum imports coming into the country. Though home loan rates have trended higher this year, they remain attractive and near historic lows.
The Jobs Report could be a market mover once February’s figures are released on Friday.
- Economic data kicks off on Monday with the ISM Services Index.
- On Wednesday, look for Productivity numbers and the ADP National Employment Report.
- As usual, weekly Initial Jobless Claims will be released on Thursday.
- On Friday, the February Jobs Report will be delivered. This includes Non-Farm Payrolls, the Unemployment Rate and Hourly Earnings.
If you or someone you know has questions about home loans, please reach out at any time. I’m always happy to help.