Guest Post – Tradition Mortgage’s Weekly Update May 23, 2016
Fed Comments Reveal Plan for Rate Hike
Speeches made by Fed officials during the first part of the week alerted investors that the Fed may be much closer to another federal funds rate hike than investors expected. On Wednesday, the release of the minutes from the April 27 Fed meeting confirmed this. In the minutes, Fed officials made it clear that they will consider raising rates as soon as June if economic conditions continue to improve. Investors currently view tighter Fed policy as negative for mortgage rates, so rates rose as the Fed’s position became better understood. Rates ended the week higher as a result of the news.
One factor supporting the case for tighter monetary policy is stronger than expected improvement in the recent housing data. Existing home sales in April rose for the second straight month and were 6% higher than a year ago. Inventories of existing homes available for sale jumped 9% from March. Sales of existing homes make up about 90% of the market. Housing starts, an indicator of future sales activity for newly built homes, increased 7% in April from March.
Factors: New home sales data will be released on Tuesday. Durable orders and the pending home sales data will come out on Thursday. The second estimate of first quarter GDP, the broadest measure of economic growth, will be released on Friday. Several Fed officials are scheduled to make speeches this week as well.
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