Overview: Over the past week, investors were focused primarily on the coronavirus and central bank meetings. There were no surprises on either front, however, and mortgage rates ended nearly unchanged.
With the spread of the coronavirus, investors have grown a bit more concerned that it could slow global economic activity, as people cut back on travel and other activities. As a result, investors have continued to shift from stocks to bonds, which was a positive factor for mortgage rates this week.
As expected, the Federal Reserve (Fed) held rates steady and made only minor changes to its statement at Wednesday’s meeting. The widely held view that Fed policy is on hold for a while remained intact. When asked about the economic impact of the coronavirus, Fed Chair Jerome Powell responded that officials are closely watching the situation but that there is still too much uncertainty to speculate on its ultimate effect.
The European Central Bank (ECB) meeting also contained no surprises and caused little reaction. European benchmark rates were held steady, and the ECB announced that it will launch the first strategic review of its policy objectives and tools since 2003.
The housing data released over the past week was a bit disappointing. In contrast to last week’s strong report on sales of existing homes in December, both new home sales and pending home sales posted unexpected declines. Unlike existing home sales, which are based on actual closings, new and pending home sales measure contracts signed during the month. This means that new and pending sales better reflect recent activity than existing sales, and the results suggest that a lack of inventory in many regions has been increasingly holding sales back.
New Home Sales (thousands)
Jan. 30 — First quarter Gross Domestic Product (GDP)
Jan. 31 — Core Personal Consumption Expenditures (PCE) Price Index
Feb. 3 — Institute for Supply Management (ISM) Manufacturing Index