Overview: It was relatively quiet for mortgage markets over the past week. The Federal Reserve meeting produced no surprises, the economic data caused little reaction, and rates ended the week a bit lower.
The housing sector has continued to show exceptional strength following the temporary weakness it experienced last spring. In December, existing-home sales were 22% higher than a year ago, and 2020 had the most home sales since 2006. The median existing-home price was 13% higher on an annual basis. Inventory levels, however, were down 23% from a year ago and remain a major issue. The number of homes for sale was at just a 1.9-month supply nationally — a historic low.
Fortunately, the latest report on housing starts contained encouraging news regarding growth in future inventory levels. In December, single-family housing starts unexpectedly rose 12% from November and were 28% higher than the year before. This was the eighth straight month of gains. Single-family building permits, a leading indicator of future construction, increased 8% from November and were 30% higher than the same time last year.
As expected, the Fed made no policy changes at Wednesday’s meeting. According to the statement, the pace of the economic recovery “has moderated” in recent months and future growth will depend on the pandemic. There was no additional guidance on the outlook for the Fed’s massive bond purchase program.
Existing-Home Sales (millions)
January 28 — Fourth-quarter gross domestic product (GDP)
January 29 — Core Personal Consumption Expenditures (PCE) Price Index
February 1 — Institute for Supply Management (ISM) Manufacturing Index
February 3 — ISM Services Index