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FOMC Statement: Asset Purchases to end in October, Labor Market Stronger

July 31, 2014 by Kay Monigold

FOMC Statement Asset Purchases to end in October Labor Market StrongerThe Federal Reserve’s Federal Open Market Committee (FOMC) released its customary statement at the conclusion of its meeting on Wednesday. FOMC members oversee the Fed’s monetary policy. In recent months, investors and economists have speculated on whether or not the Fed would continue tapering its asset purchases under its latest quantitative easing (QE) program, and whether the Fed would raise its target federal funds rate of 0.00 to 0.250 percent.

According to its statement, FOMC members plan to continue tapering monthly asset purchases of Treasury securities and mortgage-backed securities until asset purchases under the QE program conclude in October. FOMC statements have repeatedly indicated that members do not foresee raising the target federal funds rate for a “considerable period” after the QE asset purchases cease. Wednesday’s FOMC statement reasserted this position, and said that the committee may keep the current target federal funds rate at its current level for “some time” after employment levels and inflation reach normal levels.

Committee member and Philadelphia Federal Reserve Bank President and CEO Charles I. Plosser objected to use of the term “considerable period” as being “…time dependent and not reflecting economic progress made toward the committee’s goals.”

The committee’s comments about asset purchases and the target federal funds rate included the usual reminder that asset purchases and determination of the target federal funds rate are not on a predetermined course and are subject to adjustment should economic conditions merit changes in FOMC monetary policy.

FOMC Concerned with Housing Markets, Unemployment

The committee’s statement said that while FOMC members noted improvements in labor markets, but the unemployment rate remains elevated. The FOMC statement noted that “a range of labor market indicators suggest that there remains significant underutilization of labor resources.”

In spite of encouraging labor market reports, FOMC members remain concerned about overall labor market conditions, and are not relying on the national unemployment rate alone as an accurate measure of labor market health.

Home prices continue to rise, but at a slower pace in many areas. On a positive note, the statement indicated that FOMC members found that the likelihood of inflation running consistently below the committee’s target rate of 2.00 percent was “diminished somewhat.”

While Wednesday’s FOMC statement reflected signs of an ongoing economic recovery, it’s evident that FOMC members plant to keep a close eye on factors that impact their expectations for the economy.

Filed Under: Market Outlook Tagged With: FOMC, Housing Market, Market Outlook

S P Case-Shiller Home Price Index: May Home Prices Rise

July 30, 2014 by Kay Monigold

S&P Case-Shiller Home Price Index: May Home Prices RiseMay home prices rose in all 20 cities tracked by the S&P Case-Shiller 20 City Home Price Index. This was the second consecutive month in which all cities posted gains.

On average, national home prices rose by 1.10 percent in May as compared to April’s reading. Year-over-year, home prices rose, but at a slower rate of 9.39 percent in May as compared to 10.80 percent year-over-year for April.

Nevada, Florida and California Cities Post Highest Gains 

Cities posting the highest year-over-year price gains in May included Las Vegas, Nevada at 16.90 percent, San Francisco, California at 15.40 percent, Miami, Florida at 13.20 percent. San Diego and Los Angeles, California reported home price growth rates at 12.40 and 12.29 percent respectively.

According to the 20-City Index, home prices are 18 percent below their peak reached in mid-2006, but are 27 percent higher as compared to March 2012 lows.

Pending Home Sales Decline in June

More evidence of sluggish home sales was reported for June. The National Association of REALTORS® reported that pending home sales dropped by 1.10 percent in June. This was a surprise as compared to May’s month-to-month gain of 6.00 percent for pending sales.

Several factors were cited as contributing to slower home sales; higher home prices, stagnant wage growth, higher mortgage rates and stringent loan requirements were seen as obstacles for home buyers. Pending home sales are an indicator of future closings and mortgage activity. Approximately 80 percent of purchase contracts signed sales completed within 60 days.

FHFA House Price Index: Home Price Growth Slips in May

FHFA, the agency that oversees Fannie Mae and Freddie Mac, reported that home prices grew by 0.40 percent in May to a seasonally-adjusted year-over-year rate of 5.50 percent as compared to April’s year-over-year reading of 5.90 percent. FHFA’s House Price Index is based on sales of homes connected with Fannie Mae and Freddie Mac mortgages. 

On a positive note, the reading for the Consumer Confidence Index jumped from 85.20 in June to 90.90 in July. Expanding consumer confidence suggests that more families may decide to transition from renting to owning their homes, and that homeowners may feel confident enough to move up to larger homes.

 

Filed Under: Mortagage Tips Tagged With: Case Shiller, Mortgage, Price Index

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Kay MonigoldKay Monigold
Owner/Mortgage Broker/Residential Mortgage Loan Originator
NMLS#1086176

Steven LoweSteven P Lowe, Sr
Residential Mortgage Loan Originator
NMLS #1085638

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