Overview: Over the past week, investors were mostly focused on today’s Federal Reserve meeting. In anticipation of its outcome, mortgage rates moved a little higher ahead of the meeting, but the reaction following the actual release of the Fed’s statement was small. As a result, mortgage rates ended the week only slightly higher.
As widely expected, the Fed raised the federal funds rate by 25 basis points. Of greater interest to investors, Fed officials increased their projected pace of future rate hikes from their last set of forecasts in December. While just four officials projected in December that four rate hikes will be needed in 2018, seven officials now expect that to be the case. The forecasts for the pace of rate hikes in future years also increased.
The recent housing data was encouraging. In February, sales of previously owned homes increased 3% from January. The results could have been even better, but severe winter weather in the Northeast and Midwest likely held back sales in those regions. The median existing-home price was 6% higher than a year ago. The inventory of homes for sale rose 5% from January, but it was 8% lower than a year ago. Home builders appear to be responding to the lack of inventory. Single-family housing starts in February rose 3% from January, and there were 501,000 single-family units under construction, the most since June 2008..
Looking ahead, the Durable Goods report, an important indicator of economic activity, and the New Home Sales report will be released on Friday. The Pending Home Sales report will come out on March 28. The core Personal Consumption Expenditures (PCE) Price Index, the inflation indicator favored by the Fed, will be released on March 29. In addition, Treasury auctions on Tuesday and Wednesday could influence mortgage rates.