Market Minutes for the week starting February 29, 2016

Market Minutes for the week starting February 29, 2016

The S&P/Case-Shiller Home Price Index showed prices in its 20-city composite index rose 0.8% month over month in December, but remember, this index only accounts for the 20 largest markets.

Existing home sales data shows prices softening. The median price of an existing home fell 4.2% to $213,800 in January. At the current sales pace, supply has moved up to four months. This isn't a bad dynamic: A lower rate of price appreciation coupled with increased supply bodes well for existing home sales in coming months.

Things are somewhat less positive in the new home market. Prices pulled back meaningfully last month, with the median price of a new home falling 5.7% to $278,800. Year over year, the median price of a new home is actually down 4.5%.

January was a disappointing month, to be sure, but we don't expect January to become the new norm. More new homes coupled with more affordable pricing should keep sales brisk through most of the year.

Since January is not seen as a prelude to 2016, Federal Reserve Vice Chairman Stanley Fischer recently stated that the Fed still expects to raise rates again this year, even though traders in federal funds rate futures contracts are offering a 28% chance of a rate increase by December.

We just don’t expect that rate increase anytime soon. Given the strength of the U.S. dollar on the world stage, and given that so much debt in Europe and Japan offers a negative yield, we don't see the Fed moving on rates until at least summer.

The good news is that we don’t just have low lending rates. We have low lending rates that are available to more borrowers.

The Federal Reserve surveyed 63 banks in the fourth quarter of 2015 and found that 11 of them reported that credit standards on GSE-eligible loans continue to ease. This marks the seventh-consecutive quarter that credit standards have eased. This is the longest this trend has lasted since the mid-1990s.

Basically, we have low mortgage rates, and more people able to access these low rates. 2016 is shaping up to be another solid lending year.