Positive Economic Indicators
Rates inched up last week after positive domestic and international economic news. We saw initial jobless claims fall to the lowest level in nearly 4 years, while showing minimal inflation risk with nearly no increase in the Consumer and Producer Price Indices. Abroad, investors seem to be reacting positively to Greece debt restructuring talks along with speculation that positive steps will be made to quell the overall European sovereign debt crisis. With improved sentiment among investors, mortgage and treasury rates have been inching upward the last several days. But, the government continues to buy a relatively constant amount of U.S. Treasuries and mortgage-backed securities, which continues to propel a very low rate environment.
Positive news was released from the housing sector last week, showing sales of existing homes growing for the third consecutive month (at a rate of 5%). With housing sales up, the level of unsold inventory continues to decline (to the lowest level in seven years) which is a hopeful sign for the housing market for 2012. Keep an eye on New Home Sales figures being released Thursday, which are expected to show modest growth as well.
With last week being the first in many where we saw mortgage rates bottom out and slightly increase, it will be important to look for news on the European economic resolution, as well as this week’s U.S. economic indicators, to determine where rates are headed.
The Federal Reserve meets tomorrow and is expected to outline longer term plans for rates in its announcement on Wed. Depending on when the Fed sees upward pressure on rates, we could see an impact to mortgage rates after the announcement. GDP will also be released on Friday with an expected fourth quarter growth of ~3%. If actual GDP is reported lower, you could see rates fall to close the week. If we continue to see positive economic indicators, you could see more investment flow into equities which could put upward pressure on mortgage rates.