The Fed Minutes, released last Wednesday, had a positive impact on mortgage rates. Fed members noted that they had not yet seen evidence that inflation would move to the 2 percent target range, which helped mortgage rates end the week lower.
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Overall, Fed officials have mixed views on when to raise the federal funds rate. While most agree that conditions for tightening are close to being met, some are reluctant to commit to a rate hike at the next meeting in September. The Fed lowered its forecast for future inflation, which has remained below the 2 percent target level for several years.
Existing home sales were up a stronger-than-expected 2 percent in the month of July, up to the highest level since February 2007. Sales are up 10.3 percent year-over-year and the median existing home price is up 5.6 percent to $234,000. Demand is still well ahead of supply, though.
The Housing Market Index increased one point with the future sales component leading the report. The strength in the labor market is increasing demand for new homes, while lack of supply continues to motivate builders.
Last week in the economy:
- Mortgage rates (the national average) fell 0.08% (8 basis points).
- The S&P 500 began the week at 2,078 and ended the week at 1,971 (down 5.76%).
- A dip in mortgage rates boosted refinancing demand 7% while purchase applications fell 1%.
- The Consumer Price Index rose only 0.1% in July.
- Initial Jobless Claims are still at rock-bottom lows and point to continuing improvement on the unemployment side of the labor market.
- Housing starts fell in the month of July, with permits decreasing 16%.
What's on the economic calendar for the week of August 24, 2015: