After a slowdown during the spring, housing seemed to be making a comeback this summer. New Home Sales surged in August to an annualized rate of 504,000 units, up 18 percent over July. This was the first gain since May and the highest level since 2008. And the National Association of Home Builders reported that its Housing Market Index rose by four points in September to 59, its highest level since November 2005. The index measures home builder confidence in the newly built single home sector of the market, so this looked like a good sign for the housing industry.
But other reports have disappointed, and economists have been worried about the erratic performance of the housing market. Housing Starts, measuring new residential construction, dropped 14.4 percent from July to August. Building Permits, which are a sign of future construction, declined nearly 6 percent, while Existing Home Sales fell nearly 2 percent (more about Existing Home Sales below).
In other important news this fall, the Fed announced further tapering of its big Bond-purchase program. The Fed will now purchase $5 billion in Mortgage Bonds and $10 billion in Treasury securities each month, well below the $85 billion a month when the program first began.
The Fed is expected to fully wind down the program at the end of October, and this is significant because home loan rates are tied to the performance of Mortgage Bonds. The question remains: Will the end of the program be a trick or a treat for Mortgage Bonds and home loan rates?
The bottom line is that home loan rates remain attractive compared to historical levels, and now is a great time to consider a home purchase or refinance. As always, please let me know if you have any questions!