The Federal Open Market Committee Indicates Taper End In March, Rate Hike in our midst! Read on

FOMC Indicates Taper End In March, Rate Hike Soon

Officials at the Federal Reserve have been persuaded by rising inflation and a solid labor market that interest rates must be increased “soon.” However, a specific date has yet to be announced.

The Federal Open Market Committee (FOMC) resolved on Wednesday to hold the federal funds rate target range at 0 to 0.25 percent, but it is expected that rates will be hiked in early March.

Mortgage-backed securities and loan rates will rise in 2022 due to the announcement of a rate hike and the closure of the pandemic-era asset purchasing policy, which will strain mortgage-backed securities. For a typical 30-year mortgage, mortgage rates are currently above 3.5 percent, and the Mortgage Bankers Association predicts that by the end of the year, mortgage rates will rise to 4%.

New Home Inventory Rises 58% Year-Over-Year

The 11.9 percent month-over-month gain in new home sales was the best since last March. The U.S. Census Bureau and Department of Housing and Urban Development reported that newly constructed homes sold during the month at a seasonally adjusted annual rate of 811,000 compared to a revised rate of 725,000 (from the 744,000 originally reported) in November. The annual rate of 943,000 in December 2020 was 14.0 percent lower than 943,000 in December 2019. The following month, sales increased to 993,000, which was the year’s peak for 2021.

This year, inventories have increased significantly. Only 299,000 new homes were on the market in December 2020, a 3.8-month supply. The inventory had climbed to 403,000 new homes available by the end of the year, an estimated 6.0-month supply. However, only 39,000 of the homes were built, and a quarter of them was only in the permitting stage. In November, the inventory was anticipated to be 6.6 months at the current sales pace.

Prices in 19 of 20 Case-Shiller Cities at All-Time Highs

The Case-Shiller U.S. National Home Price NSA Index, which includes all nine census divisions in the United States, was 18.8% higher in November than a year before. The 10-City Composite’s yearly gain was 16.8%, while the 20-City Composite’s year-over-year growth was 18.3%.

Among the 20 cities studied, Phoenix, Tampa, and Miami remained at the top for annual appreciation, followed by Las Vegas, Dallas, and San Diego.

We continue to see very strong growth at the city level. All 20 cities saw price increases in the year ended November 2021, and prices in 19 cities are at their all-time highs. November’s price increase ranked in the top quintile of historical experience for 19 cities, and in the top decile for 16 of them,” says Craig J. Lazzara, Managing Director at S&P DJI.

Next week’s potential market-moving reports are:

  • Monday, January 31st – No Report    
  • Tuesday, February 1st – Jop Openings, Job Quits, Construction Spending
  • Wednesday, February 2nd – Employment Report, Home Ownership Rate
  • Thursday, February 3rd – Initial Jobless Claims, Continuing Jobless Claims
  • Friday, February 4th – Unemployment Rate

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 feel free to reach me at (800) 216-1047.