Spring is nearly here, and some sectors of the economy are warming more than others.
Home Sales: Heating Up
Lower than expected home loans rates are making homeownership more affordable than renting in many areas. January Existing Homes Sales, which measures pre-owned single-family home sales, edged up 0.4 percent from December to an annual rate of 5.47 million units, the highest level since July 2015. Sales have shot up over 11 percent in the past year and reflect the largest year-over-year gain since July 2013.
January Housing Starts (measured by the start of excavating a home’s foundation) did hit a three-month low, thanks in part to winter weather. However, January Building Permits showed future construction is in line with expectations.
GDP: Slow Thaw
The second reading of Gross Domestic Product (GDP) from the final quarter of 2015 showed growth of 1 percent, above the 0.7 percent recorded in the first reading. GDP is one of the primary gauges of the health of our country’s economy and represents the total dollar value of all goods and services produced over a specific time period. Readings should be at least 2.5 percent to signify growth. While growth certainly isn’t stagnant, there is undoubtedly room for improvement.
Inflation: Hot or Not?
Inflation, as measured by the Core Personal Consumption Expenditures index, rose 0.3 percent in January from December and year-over-year 1.5 percent. January’s Core Consumer Price Index (CPI), a measure of consumer inflation that strips out volatile food and energy, rose 0.3 percent in the largest gain since August 2011.
Inflation is not Bond-friendly news, since it reduces the value of fixed investments like Bonds. This means inflation also isn’t a good sign for home loan rates, which are tied to Mortgage Bonds. While inflation has not been an issue for some time, if these increases in inflation become a trend rather than a pop, home loan rates could move higher.
For now, home loan rates remain near historic lows. If you have any questions about loan rates or products, please don’t hesitate to contact me.