Fed Not Ready To Take The Punch Bowl Away

By
Mortgage and Lending with Atlantic Home Loans 12937

Favorable Fed Meeting

 

Investors liked what the Fed said, or didn't say, following Wednesday's meeting. Both stocks and bonds reacted favorably. The economic data had little impact. As a result, mortgage rates ended the week lower. 

 

As expected by most investors, the Fed did not raise the federal funds rate. The Fed explained in its post-meeting statement that the case for a rate hike "has strengthened," but Fed officials decided to wait for "further evidence of continued progress toward its objectives." Notably, Fed officials remain divided about the appropriate timing to tighten monetary policy. In a rare occurrence, three out of ten voting Fed members dissented from the decision because they wanted a rate hike to take place at this meeting. Conversely, three Fed officials indicated in their forecasts that they do not see a need to raise rates at all this year. Investors were pleased that the Fed did not come out more strongly in favor of tighter monetary policy, and mortgage rates improved following the meeting. 

 

The housing data released over the past week was mixed. After reaching a multi-year high this summer, sales of previously owned homes in August declined for the second straight month. According to the National Association of Realtors, low levels of inventory are holding back home sales in many regions. Inventories of homes for sale declined 3% from July and were 10% lower than a year ago. 

 

There are signs that building activity for single-family homes may pick up in coming months, however. In August, building permits for single-family homes increased 3.7% from July, which was the largest monthly increase since June 2014. In addition, the NAHB home builder confidence index jumped to 65 in September, which matched the highest reading since 2005.

 

Looking ahead, New Home Sales will be released on Monday. Durable Orders, an important indicator of economic activity, will come out on Wednesday. Pending Home Sales and the third estimate of second quarter GDP will be released on Thursday. The Core PCE price index, the Fed's preferred inflation indicator, will come out on Friday.

Comments (3)

Roy Kelley
Realty Group Referrals - Gaithersburg, MD

Thank you very much for sharing this mortgage market perspecive.

Have a wonderful weekend.

Sep 24, 2016 12:10 AM
Susan Laxson CRS
Palm Properties - La Quinta, CA
Local Knowledge & Global Network

Good morning George DeVine and thank you for the market update. Our market has slowed this past year, but we are looking forward to the arrival of the snowbirds this year and hoping the market will pick up again.

Sep 24, 2016 12:11 AM
Harry F. D'Elia III
RentVest - Phoenix, AZ
Investor , Mentor, GRI, Radio, CIPS, REOs, ABR

I very much enjoyed your post today. We are looking forward to more insightful ones.

Sep 24, 2016 12:51 AM

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