Recent economic reports show that key sectors of our economy are improving. Gross Domestic Product (GDP), the most important indicator of economic health, showed growth. The second reading of the third quarter was up 2.1 percent due to a bigger buildup in inventories.
The housing sector also showed signs of strength. October Housing Starts remained above the one million mark for seven straight months, the longest streak since 2007. Building Permits, a sign of future construction, increased, as did sales of new homes, which were up 10.7 percent in October from September. Existing Home Sales did decline in October; however, year-over-year sales were up 3.9 percent.
Real average hourly earnings (post-inflation) rose 2.4 percent in October from last year. And two stellar Jobs Reports in a row revealed rebounding job creation in October and November.
These and other economic reports have been on the Fed’s radar this fall, as the Fed continues to ponder if our economy is strong enough for it to raise its benchmark Federal Funds Rate. This rate, which is the rate banks use to lend money to other banks overnight, has been near zero for nearly a decade.
Why is this significant? When the Fed Funds Rate does rise, other consumer rates—like home loan rates—can follow, depending on overall market and economic conditions.
The October Federal Open Market Committee meeting minutes stated “most participants” agreed conditions would be right to consider an increase to the benchmark Fed Funds Rate at the mid-December meeting. Has more recent data changed Fed members’ minds, or confirmed their conviction? Stay tuned to the Fed’s meeting on December 15-16 to find out!
If you or anyone you know has questions regarding refinancing, or wants to get ahead of home-buying competition with a loan pre-approval, please get in touch today.