March Winds Down
Like the first two months of the year, March has been a very interesting month. From an economic perspective, the two “headline” events included a very strong employment report and the Federal Reserve Board announcing that they were raising rates for the fifth time in just over two years. And while these are very important events shaping the economic landscape, we have to remind ourselves that there are many other factors in play right now.
For example, while we witnessed the effect of the tax changes on the stock market even before the plan was enacted, the economic effects of the tax plan are just starting to hit. While the vast majority of the changes in the economy will be positive, we have already pointed out that the price to pay for stronger economic growth will be higher interest rates. These rates will affect consumers such as homebuyers, but also the government’s budget. For example, in February, the federal government racked up the largest deficit in six years because of lower tax receipts and increased spending — which included a higher bill for interest on the government’s massive debt.
Even the immigration debate and implementation of tariffs will influence the economy. One of the greatest needs today is more inventory for our nation’s homebuyers and builders are complaining about the lack of skilled labor to build our homes. Tariffs on lumber and steel will also have a negative effect upon the cost of building our homes, though it is hopeful that our domestic production can step-up and create more jobs while they fill in the gaps. Thus, there is no free lunch. Every change brings positives, but also costs. The good news is that the economy is stronger, and jobs are being created — plus homebuyers are waiting to purchase your home if you are willing to sell it!
The Weekly Market Update
Rates on 30-year fixed home loans were stable in the past week. For the week ending March 15, Freddie Mac announced that 30-year fixed rates rose one tick to 4.45% from 4.44% the week before. The average for 15-year loans also increased slightly to 3.91% and the average for five-year adjustables rose to 3.68%. A year ago, 30-year fixed rates averaged 4.23%, higher than today’s level.
Attributed to Len Kiefer, Deputy Chief Economist, Freddie Mac — “The Federal Reserve raised interest rates — a much-anticipated move that comes as both U.S. and global economic fundamentals continue to strengthen. The Fed’s decision to raise interest rates by a quarter of a percentage point puts the federal funds rate at its highest level since 2008 — a decision which was widely expected. The U.S. weekly average 30-year fixed rate rose only 1 basis point to 4.45% percent in this week’s survey. So far, U.S. housing markets remain resilient in the face of higher interest rates. The National Association of Realtors® reported this week that existing home sales in February increased 3 percent month-over-month on a seasonally adjusted basis and are up 1.1 percent from a year ago.”
Note: Rates indicated do not include fees and points and are provided for evidence of trends only. They should not be used for comparison purposes.