After falling to levels near historical lows, mortgage rates have held fairly steady for several weeks. Weak economic growth around the world and large Fed purchases of mortgage-backed securities (MBS) have helped keep mortgage rates low.
The trigger for the recent decline in mortgage rates was the announcement following the March 18 Fed meeting that the Fed would increase its purchases of MBS from $500 billion to $1.25 trillion by the end of the year. Since then, the Fed has increased its pace of MBS purchases to about $30 billion per week, which represents over half of all agency MBS issued during an average week. The increased demand associated with the Fed purchases reduced the MBS yield required by investors. Since mortgage rates are determined largely by MBS yields, they followed MBS yields lower.
The Fed’s plan was that lower mortgage rates will spur an increase in refinances and home purchases, and the early signs are encouraging. Mortgage activity has increased dramatically over recent weeks. According to the Housing and Urban Development Department (HUD), refinancing activity is up 88% and purchase activity is up about 20%. The long-term effects of the MBS purchase program remains to be seen, but the short-term benefit has certainly been substantial for the housing market.
The most significant economic data next week will be the monthly inflation reports. The Producer Price Index (PPI) focuses on the increase in prices of “intermediate” goods used by companies to produce finished products and will come out on Tuesday. The Consumer Price Index (CPI), the most closely watched monthly inflation report, will come out on Wednesday. CPI looks at the price change for those finished goods which are sold to consumers. In addition, Retail Sales on Tuesday and Industrial Production on Wednesday will provide important indications of economic activity. Retail Sales account for about 70% of economic activity. Housing Starts an d Consumer Sentiment will round out a busy week.
Avg. Sales Price: $180,101
Avg. Days on Market: 128 *From final list
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