The
housing sector continues to improve despite the recent rise in home
loan rates, as housing starts rose 5.9 percent from June to July to
896,000 on an annualized basis. This was in line with estimates.
Building permits, a sign of future construction, were up 2.7 percent,
coming in above expectations. In addition, the National Association of
Home Builders Housing Market Index rose to 59 in August from the 57
recorded in July. This is the best level in nearly eight years.
Retails
Sales for July were also positive, rising for the fourth straight
month. When stripping out autos, sales surged by 0.5 percent, the
fastest pace this year. And there was good news for the labor market, as
Weekly Initial Jobless Claims fell to 320,000, a level not seen since
October 2007. There were no apparent seasonal distortions in the
numbers. In the manufacturing sector, Empire State Manufacturing came in
above expectations, while the Philadelphia Fed Index came in just below
expectations.
What does this mean for home loan rates?
Remember that the Fed has been buying $85 billion of bonds a month to
help stimulate the economy and housing market. This includes mortgage
bonds, to which home loan rates are tied, and these purchases have
helped home loan rates remain attractive.
The
Fed has said the rate of its purchases will continue to depend on
economic data and could be increased or decreased accordingly. The data
that continues to come in will be a key factor in whether the Fed begins
tapering these purchases as early as its meeting in mid-September, or
if it waits until later in the year or even 2014.
One
thing that is also important to note is that inflation at both the
wholesale and consumer levels remains moderate, as evidenced by the
Producer and Consumer Price Indexes for July. This gives the Fed cover
to continue its bond purchases if economic data takes a turn for the
worse.
Now
remains a great time to consider a home purchase or refinance, as home
loan rates remain attractive compared to historical levels.
And there’s good news for borrowers, About 47.72 percent of
mortgages from June 2013 had an average FICO score under 700, compared
to only 28.53 percent from June 2012. As credit requirements ease and
home buying picks up pace, lenders will be competing for attention and
loyalty from Realtors. This changes the competitive landscape, placing
new requirements on mortgage professionals.
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