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Blog posted On December 19, 2016
Last week, the Federal Open Market Committee raised the benchmark interest rate and mortgage rates reacted accordingly and increased. Some sources reported the highest reading of the year. This week, the GDP revision comes out on Thursday. Third quarter numbers were strong and this momentum is expected to carry into the end of the year. Existing home sales and new home sales are also slated for release.
The Q3 GDP increased at a 3.2% annual rate, at its fastest pace in two years. Growth was propelled by a lift in soybean exports to South America. Other factors that pumped up the GDP were business investment in structures and home building.
Last month, existing home sales surged, growing at the strongest pace since February 2007. Existing home sales account for the majority of US home purchases. These numbers may have been influenced by the recent uptick in mortgage rates, as prospective buyers are looking to lock before rates climb any higher. Another factor is shrinking inventory, with buyers making moves due to limited availability.
Coming off a multi-year high in July 2016, new home sales fell 1.9% in October. The housing market tends to slow down toward the end of the year, and the drop is marginal. Economists suggest that new home sales may have peaked for the 2016 cycle.
As the year comes to an end, economists are watching this month’s reports closely in order to forecast the temperature for 2017. Over the course of her term, Yellen has stayed dovish in her policy, but the recent projection of three rate hikes indicates things may take a hawkish turn.
Sources: CNBC, Mortgage News Daily, Bloomberg, MarketWatch
