The housing sector is beginning 2015 on a strong note. December new home construction came in at a 4.4 percent increase over November, which was above expectations and the strongest annual pace in seven years. This was led by another jump in existing single-family home sales, the highest since early 2008. A Fannie Mae survey revealed 64 percent of consumers said it was a good time to buy a home, and the numbers seem to agree.
Also of note, in mid-January, the Bureau of Labor Statistics reported that the Consumer Price Index (which measures inflation at the consumer level) recorded its smallest gain in five years, mainly due to plunging oil prices. The year-over-year CPI rose by 0.8 percent in December, well below the 2.1 percent annual increase registered in June of last year. Inflation continues to remain tame for the time being, which is typically good news for both Mortgage Bonds and home loan rates.
The troubled economy overseas saw the Euro hit an 11-year low after the European Central Bank announced its massive Quantitative Easing (QE) program, which will purchase up to 60 billion euros per month in government Bonds through September 2016. The European QE is the same style of economic stimulus recently concluded in our country, but whether the program can help the troubled region remains to be seen.
One important takeaway from this development is that the uncertainty overseas means investors will most likely be looking to our Bond markets as the safest haven for investing. This could benefit Mortgage Bonds, and also help keep home loan rates (which are tied to Mortgage Bonds) near historic lows.
For now home loan rates continue to remain attractive, so it’s a great time to consider a home purchase or refinance. As always, please let me know if you have any questions.