Lee Morof's Real Estate Blog

Last week’s economic releases included readings on housing starts, building permits issued and the National Association of Home Builders/ Wells Fargo Housing Market Index. Fed Chair Janet Yellen testified before the House Finance Committee and consumer spending and core consumer spending reports were also released. Mortgage rates and new jobless claims were little changed week-to-week.

Home Builder Sentiment Slows as Industry Faces Obstacles

NAHB reported lower reading for its January Housing Market Index. January’s index reading was two points lower at 65 than December’s reading. Builders surveyed for the index cited ongoing shortages of buildable lots and labor, they also said that housing regulation were causing home prices to rise as new home prices are adjusted to compensate for feels associated with new construction. Any reading above 50 for the NAHB Housing Market Index is considered more positive than negative.

Builder concerns could raise additional issues for housing markets as a persistent shortage of homes for sale has driven prices up and caused fierce competition among home buyers. First-time and moderate income home buyers have been sidelined in favor of cash buyers in ultra-competitive metro areas. There was some evidence that rapidly escalating home prices may be approaching their peak. Home prices in San Francisco, California increased more slowly in recent months and were unchanged in January.

Housing Starts Lower; More Building Permits Issued

Fewer new homes were started in January as compared to December. 1.246 million homes were started in January as compared to December’s reading of 1.279 million new homes started. Winter weather can cause fluctuations in housing starts; more building permits were issued in January than for December. 1.246 million permits were issued for January as compared to December’s reading of 1.228 million permits issued.

Home builders were also concerned about rising mortgage rates as reducing affordability for would-be home buyers; Fed Chair Janet Yellen indicated in her testimony before the House Finance Committee that economic conditions are normalizing and that the Fed would likely continue to raise the target federal funds rate as economic conditions continue to improve.

Mortgage Rates Fall, New Jobless Claims /Rise

Freddie Mac reported lower mortgage rates last week. Average mortgage rates were two basis points lower at 4.15 percent for 30-year fixed rate mortgages; the average rate for 15-year fixed rate mortgages was four basis points lower at 3.35 percent. 5/1 adjustable mortgage rates were three basis points lower at 3.18 percent. Discount points averaged 0.50 percent for fixed rate mortgages and 0.40 percent for 5/1 adjustable rate mortgages.

New jobless claims were higher last week with 239,000 new claims filed as compared to an expected reading of 242,000 new claims and the prior week’s reading of 234,000 new jobless claims.

What‘s Ahead

Next week’s scheduled economic reports include readings on new and previously owned home sales and consumer sentiment index. Freddie Mac will report mortgage rates and new weekly jobless claims will be released as usual.