Last week brought mixed news; while the Department of Commerce reported a dip in new home sales, mortgage rates also fell. The Federal Reserve’s FOMC statement revealed that quantitative easing would be further reduced by an additional $10 billion monthly.
New Home Sales: Y-O-Y Reading Best Since 2008
December’s reading of 414,000 for new home sales fell short of November’s revised reading of 445,000 new homes sold as well as expected sales of $455,000. The consensus figure was based on November’s original sales reading of 464,000 new homes sold.
The inventory of new homes available rose from last month’s level of 4.70 month supply to a 5 month supply in December. Cold weather was cited as a cause of lower new home sales.
New home sales increased by 4.50 percent year-over-year; this was the highest reading since 2008. The median price of a new home rose by 0.60 percent in December to $270,299.
The national median home price was $265,800 in 2013, an annual growth rate of 8.40 percent and the highest annual growth rate for median home prices since 2005.
Economists cited rising mortgage rates, new mortgage rules and a lagging labor market as signs that slower home sales could be expected in 2014.
Pending home sales echoed the slowing trend in home sales; the index reading fell by -8.70 percent to a reading of 92.4 in December.
All Four Regions Reported A Drop In Pending Sales As Compared To November:
Northeast -10.30 percent
West -9.80 percent
South -8.80 percent
Midwest -6.80 percent
This was the lowest reading for pending home sales since October 2011.
Case-Shiller: Home Prices Up 13.7%
The Case-Shiller 10 and 20 city home price indices for November reported a 13.70 percent gain in home prices year-over-year. This was the fastest annual growth rate in home prices since 2006. Further evidence of slower growth in home prices was evident as nine of 20 cities tracked reported lower home prices.
Fed Continues Stimulus Reduction
Wednesday’s FOMC statement confirmed expectations that the Fed would continue tapering its monthly asset purchases made under its quantitative easing program.
Monthly purchases of mortgage-backed securities and Treasury securities will be reduced from January’s level of $75 billion to $65 billion in February. Economists expected this reduction to occur.
Freddie Mac’s Primary Market Survey reported lower average mortgage rates. The rate for a 30-year fixed rate mortgage fell by 7 basis points to 4.32 percent with discount points unchanged at 0.7 percent.
15-year mortgage rates also fell to 3.40 percent with discount points lower at 0.60 percent. The average rate for a 5/1 adjustable rate mortgage fell by 3 basis points to 3.12 percent with discount points unchanged at 0.50 percent.
This was welcome news as homebuyers and mortgage lenders have felt the effects of higher home prices and new mortgage rules that became effective January 10.
New Jobless Claims Higher
Weekly jobless claims jumped to 348,000 from the prior week’s 339,000 new jobless claims. This was the highest level of new jobless claims in six weeks. Reasons for increased claims were unclear, but were possibly caused by lingering influences of the holiday season or a sinking labor market.
Consumer confidence rose in January to a reading of 80.7 as compared to December’s reading of 77.5 as compared to January 2012’s reading of 58.4.
This week’s scheduled economic and housing news includes construction spending, non-farm payrolls and the national unemployment rate. Freddie Mac’s PMMS report and weekly jobless claims will be released as usual on Thursday.