Last Week in Review This winter certainly has been a long one for much of the nation and has had its effect on economic indicators. As temperatures slowly begin to thaw, recent economic reports reflect an economy in bloom. After falling for two months, retail sales rose by 0.3 percent in February, above expectations, as consumers purchased a variety of goods despite the harsh winter weather. This is important because retail sales make up about one-third of consumer spending, the main driver behind economic growth. If consumer spending can continue to expand, economic growth could go beyond the recent 2 percent levels we have seen the past few years, which would be good news for the economy. The labor market also showed positive signs last week, as the Initial Jobless Claims report fell to 315,000, the lowest level since the end of November. And there was good news on the housing front, as RealtyTrac reported that foreclosure filings in February declined by 10 percent from January, and are down a whopping 27 percent from the same period last year. What does this mean for home loan rates? Typically, good economic news benefits stocks at the expense of bonds, as investors try to take advantage of gains. However, concerns about an economic slowdown in China and tensions in the Ukraine helped mortgage bonds improve due to safe haven trading. And as home loan rates are tied to mortgage bonds, this was good news for rates as well. The Fed is continuing its monthly purchase program: $35 billion in Treasuries and $30 billion in mortgage bonds (the type of bonds on which home loan rates are based) to help stimulate the economy and housing market, down from the original $85 billion per month that the Fed had been purchasing. The Fed is meeting again this week, and additional tapering could be announced on Wednesday. This decision is sure to impact the markets and home loan rates, and it’s an important story to monitor. The bottom line is that now remains a great time for clients to consider a home purchase, as home loan rates remain attractive compared to historical levels. Let me know if I can answer any questions....
Posted on: Wed, 19 Mar 2014 13:09:53 +0000