As sure as the Holidays pass, and father time swipes the clock to the new year, Realtors will begin touting that winter is the best time of the year, not only to buy a home, but to sell as well. The mantra goes, there is less inventory, so a would be home seller has less competition. Conversely, most people like to purchase during the spring and summer months, so there is less competitive bidding to purchase. While there is merit to this logic, mortgage interest rates of late may actually lend credence to this line of reasoning.
Often times, interest rate markets will move up or down in what might be viewed as ancillary influences. Environments such as the one we are in now are typically short-lived as the markets yield to more traditional macro-economic influences. This is what we are experiencing right now, interest rates have declined by nearly .50 percent (presently 4.5% - 4.75%) thanks to contemporary issues such as, China trade talks and the ensuing stock market sell-off, government shut down, and bombastic statements made by POTUS that created some tense moments as it relates to the Middle East. All of this noise will surely recede and the market will revert back to focusing upon the strong economy, and specifically, low unemployment and rising wage inflation. This will undoubtedly force mortgage interest rates back in the low 5% range by springtime.
So, the boy does cry wolf, but a clock is also correct twice a day. This actually might be a good winter to buy and sell a home.
Now for my weekly report on "more traditional" economic news....
There were no significant surprises in the major economic data or in the news from the Fed this week, and mortgage rates ended with little change.
The Consumer Price Index (CPI) is a widely followed monthly inflation report that measures the price change for goods and services. Most investors look at core CPI, which excludes the volatile food and energy components, to provide a clearer indication of the underlying trend.
The minutes from the December 19 Fed meeting released on Wednesday were consistent with recent comments from Fed officials in supporting the notion that they are open to slowing the pace of monetary policy tightening based on future economic conditions. According to the minutes, the "extent and timing of further policy firming" is "less clear" due to recent financial market volatility and signs of slowing economic growth. This message eased investor concerns that the Fed might mistakenly tighten too quickly.
Regarding the Fed's reduction in its roughly $4 trillion in holdings of Treasuries and mortgage-backed securities, Fed Chair Powell on Thursday said that the final size of the balance sheet will be "substantially smaller than it is now," but he declined to provide a less ambiguous figure. He elaborated that a "more normal level" would be no larger than the size needed to conduct monetary policy. Investors will be looking for more precise guidance in the future.
Looking ahead, Retail Sales will be released on Wednesday. Since consumer spending accounts for about 70% of all economic activity in the U.S., the retail sales data is a key indicator of growth. Housing Starts will come out on Thursday. Industrial Production, another important indicator of economic activity, will be released on Friday.