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Fed raises policy rates but mortgage rates stay low in this week’s Markets in a Minute!

Fed raises policy rates but mortgage rates stay low in this week’s Markets in a Minute!
December 15, 2017 Fred Kreger

 

 

For the Week Ending December 15, 2017

The FOMC Meeting:

As expected, the Federal Open Market Committee voted to raise the Fed Funds Rate by 25 basis points, bringing the rate to a range of 1.25 to 1.50 percent. The board members voted 7-2 in favor of the interest rate
increase. The two members who voted against the rate increase, do not seem to agree with the other members views on the likelihood of wage-push inflation due to the high levels of employment. The Fed has indicated that their current plan for 2018 is three
more 25 basis point rate increases.

 

The Stock Market:

The stock market met the Fed announcement with little more than a yawn. There was nothing in the Fed message that was a surprise. For the last few months, the majority of investors and analysts have been expecting
the rate increase, so the stock market was business as usual.

 

Mortgage Rates and Loan Activity:

Until this week, mortgage rates have been inching higher. The Mortgage Bankers Association reported for the week ending December 8th, applications for purchases declined 1.0 percent, and refinances dropped 3.0 percent.

In what was a little bit of a surprise, bonds rallied after the Fed announcement on Wednesday of this week. The 10 Year Bond yield, which is a representation of mortgage rate movement, but not the basis for them,
declined after the Fed announcement.

The stock market declined on Thursday as did bond yields as investors placed more money into the bond market after digesting the Fed’s announcement. There is some investor sentiment that now exists in that the Fed’s
plans for interest rate increases over the next year may slow economic growth.

 

Housing:

There is growing concern in regard to the future of the housing market. With all of the talk on the proposed tax reform and the lowering of the real estate tax deduction limit, concerns exist on how this could impact,
and potentially hurt the housing market. We just have to wait and see what will be passed.

 

Next week’s potential market moving reports are:

• Monday December 18th – Housing Market Index
• Tuesday December 19th – Housing Starts
• Wednesday December 20th – MBA Mortgage Applications, Existing Home Sales
• Thursday December 21st – First Time Jobless Claims. FHFA House Price Index
• Friday December 22nd – New Home Sales, Durable Goods Orders

 

As your mortgage and real estate professional, I am happy to assist you with any information you may need regarding mortgage or real estate trends. I welcome the opportunity to serve you in any way I possibly can.

 

Please enjoy this quick update on what happened this week in the housing and financial markets.

 

 

Tax reform is moving forward. Lawmakers are currently reconciling the Senate and House versions. The GOP is trying to get it done before 2018.
The Fed raised policy rates at this week’s meeting, as expected. The rate increase actually helps to keep mortgage rates low for the near term.
The Fed is expected to raise rates 3 times in 2018, based on current forecasts. The policy rate increases could pressure mortgage rates higher for next year.

 

Homebuilders that focus on entry-level housing are expected to flourish in 2018. A growing economy, solid job market, and low mortgage rates are driving demand.
In its 2018 forecast, Realtor.com predicts home prices will go up 3.2% and sales will increase 2.5%. Inventory is also expected to rise.
Mortgage rates remain low, and mortgage applications remain high. New purchase apps were 10% higher than a year ago this time.

Sister: “What are you giving Mom and Dad for Christmas?”

Brother: “A list of everything I want!”

 

Rate movements and volatility are based on published, aggregate national averages and measured from the previous to the most recent midweek daily reporting period. These
rate trends can differ from our own and are subject to change at any time.

 

Sincerely,
Fred Kreger
American Family Funding
Certified Mortgage Consultant
NLMS # 1850 / 214640 BRE# 01215943 / 01371184
(661) 505-4311
Fred.Kreger@affloans.com
28368 Constellation Road
Suite 398
Santa Clarita, CA
91355

www.fredkreger.com

 

©2017 American Pacific Mortgage Corporation. All information contained herein is for informational purposes only and, while every effort has been made to insure accuracy, no guarantee is expressed or implied. Any programs shown
do not demonstrate all options or pricing structures. Rates, terms, programs and underwriting policies subject to change without notice. This is not an offer to extend credit or a commitment to lend. All loans subject to underwriting approval. Some products
may not be available in all states and restrictions apply. Licensed by the Department of Business Oversight under the CRMLA.

 

 

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