Quiet Week
- Mortgage Returns
- 2 hours ago
- 2 min read
Overview: Mortgage markets were quiet over the past week. The relatively small amount of economic data provided by private companies caused little reaction. As a result, mortgage rates ended the week down slightly, near their lowest levels of the year.
The latest home builder survey on housing market sentiment revealed a nice surprise. The National Association of Home Builders (NAHB) Housing Market Index soared from 32 to 37, far above the consensus forecast of 33, reaching the highest level since April. Considering the bigger picture, however, this was the 18th straight reading below 50, indicating that most home builders do not feel optimistic about the current and short-term outlook for the housing market. Many builders continued to provide incentives to lure homebuyers, with 38% offering lower prices. The average price reduction reported by builders was 6%, the largest cut in a year. Builders again cited higher costs as a significant obstacle to a faster pace of construction.
With the limited availability of economic data from the government due to the shutdown, investors have been paying more attention to other sources of information. For example, an annual survey from Deloitte released this week shed some light on consumer expectations for the holiday shopping season. 57% of the roughly 4,000 consumers surveyed by Deloitte said that they expect the economy to weaken in coming months, up from just 30% a year ago. This was the most negative economic outlook ever recorded since the survey began in 1997. In addition, 77% of consumers expect higher prices this holiday season, and they plan to spend around 10% less than last year, on average. Younger consumers in particular plan to cut back sharply this year. Similar recent surveys from other firms found a comparable pullback for younger consumers, but also found that overall spending was closer to last year’s levels.
Lower rates boosted mortgage refinance applications again this week, according to the Mortgage Bankers Association (MBA). Applications to refinance rose 4% from last week and were a massive 81% higher than one year ago. The share of adjustable-rate mortgages (ARM) climbed to 11% of total applications, up from 9.3% last week. Purchase applications dropped 5% from the prior week but were still up 20% from this time last year.
NAHB Housing Market Index
Week Ahead
Investors will continue to monitor comments from government officials about tariffs. The next Federal Reserve meeting will take place on October 29, and investors anticipate another 25 basis-point reduction in the federal funds rate. The government shutdown means that many economic reports will continue to be delayed, but it will still be an important week. The Existing-Home Sales report will come out on Thursday. The biggest report, the Consumer Price Index (CPI), will be released on Friday. CPI is a widely followed monthly inflation indicator that looks at price changes for a broad range of goods and services