The housing sector continues to be a bright spot in the U.S. economy. New Home Sales, which reports monthly on the number of newly constructed homes with a committed sale, surged by nearly 17 percent in April from March. This was the largest monthly percentage increase in 24 years. New Home Sales are now at the highest level since January 2008, and sales are almost 24 percent higher than they were in April of last year.
The National Association of REALTORS® reported that April’s Existing Home Sales rose 1.7 percent from March, the second monthly gain in a row. A surge in the Midwest and a modest gain in the Northeast offset smaller declines in the South and West. Existing Home Sales measure both the number and prices of existing single-family homes, condos and co-op sales over a one-month period.
April Housing Starts jumped 6.6 percent from March, slightly above monthly expectations, and yet slightly below the reading from April 2015. Building Permits, a sign of future construction, rose 3.6 percent.
The Bureau of Economic Analysis reported that the second reading for first quarter 2016 Gross Domestic Product (GDP) rose 0.8 percent as expected, up slightly from the first reading. This number is still fairly anemic. The report also showed consumer spending, a big driver of the U.S. economy, up 1.9 percent, unchanged from the first reading but down from numbers recorded in the fourth quarter of 2015.
GDP is the monetary value of all the finished goods and services produced within a country’s borders in a specific time period. It is considered the broadest measure of economic activity and, by comparison, 2.5 percent is considered a more normal range that signifies economic growth.
The Fed Meeting Ahead
The low GDP reading for the first quarter, combined with slowing job creations (more on the labor sector below) are certainly two things the Fed will be discussing at its June 14-15 meeting. The Federal Open Market Committee members will once again evaluate changes to the benchmark Fed Funds Rate, which is the rate banks use to lend money to each other overnight. Changes to this rate cause volatility in the markets, which, in turn, can influence the direction of home loan rates.
Predictions are that the Fed will hold off changes in June and wait to launch fireworks until July or September. In the meantime, home loan rates remain near historic lows and provide great opportunities for anyone seeking to purchase or refinance a home.
If you have any questions about housing or home loan rates, or if you’d like to discuss your unique situation, please call or email today.