The potential for a Fed rate hike this summer and stronger-than-anticipated economic reports released last week caused mortgage rates to end the week higher.
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While the minutes from the Fed meeting showed that policymakers agreed the labor market had improved in the first quarter of 2016, improvement of gross domestic product (GDP) had slowed. Both San Francisco and Atlanta Fed Presidents stated that “June was a ‘live’ meeting in which the committee could consider lifting rates,” according to the Wall Street Journal.
The Consumer Price Index (CPI) increased 0.4 percent in April, which is largely attributed to the 10 percent monthly increase of gasoline costs. The core rate increased a respectable 0.2 percent while the year-over-year rate fell 0.1 percent for the second straight month.
According to April’s Existing Home Sales report, progress is happening slowly but surely. Sales increased by 1.7 percent from March to a 5.45 million annualized pace, which brings April up a respectable 6 percent from April 2015. Sales prices also made significant gains as well. The median price was 5.0 percent higher in the month to $232,500.
Last week in the economy:
- Mortgage rates (the national average) increased 0.10 percent (10 basis points).
- Despite mortgage rates falling to three-year lows, the purchase sector of MBA Mortgage Applications lost momentum in the May 13 week. This is the lowest level since February, though the year-over-year rate is still at a high plus 12 percent. Refinance activity increased 1.0 percent.
- Initial Jobless Claims fell 16,000 to 278,000 in the May 14 week, following two weeks of sharp increases. The 4-week average, though, spiked 7,500 higher to 275,750.
- Home builders are optimistic according to May’s Housing Market Index, which held at 58. This is the fourth straight month that the index has held at the 58 level. Anything above 50 is considered positive.
- Housing starts had a bit of lift-off in April with starts picking up 6.6 percent to a 1.172 million annualized rate and permits rising 3.6 percent in April. Regardless, both year-over-year rates are in the negative, with starts at -1.7 percent and permits at -7.2 percent.
What’s on economic calendar for the week of May 23, 2016:
- Tuesday – New Home Sales
- Wednesday – MBA Mortgage Applications and FHFA House Price Index
- Thursday – Jobless Claims, Bloomberg Consumer Comfort Index and Pending Home Sales Index
- Friday – GDP and Consumer Sentiment
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