Last week’s economic reports included readings on NAHB homebuilder confidence, housing starts, building permits issued and sales of previously-owned homes. Weekly releases on mortgage rates and new jobless claims were also released.

Builder Confidence Rises, Housing Starts Increase

According to the National Association of Home Builders Housing Market Index for December, builder confidence in housing market conditions rose by four points to 74. This reading was the highest since 1999. Builder confidence increased based on strong labor markets, demand for homes and potential tax breaks resulting from proposed tax code revisions.

Housing and real estate industries continued to cite an imbalance caused by high demand for homes and few available homes for sale. Increasing production of new single-family homes is the only way to ease the discrepancy between supply and demand. Reducing demand for homes would also slow the pace of home price growth, which impacted the ability of first-time and moderate-income home buyers to purchase homes.

Commerce Department readings indicate that builder confidence aligned with housing starts in November. 1.297 million housing starts were reported as compared to expectations of 1,250 housing starts based on October’s revised reading of 1.256 million starts on a seasonally adjusted annual basis. Housing starts were 3.30 percent higher month-to-month and 12.90 percent higher year-over-year. Single-family starts were 5.30 percent higher for November. Analysts said that this indicated builder confidence in single-family home building increased.

Building permits issued in November were lower than in October, but home construction slows in the winter months. 1,298 million building permits were issued in November as compared to 1.316 million permits issued in October.

Demand Pushes Pre–Existing Home Sales in November

Sales of Previously-owned Homes rose to 5.81 million sales on a seasonally-adjusted annual basis as compared to October’s reading of 5.50 million sales of previously-owned homes. Pre-owned homes sales were 5.60 percent month-to-month and 3.80 percent higher year-over-year.

The National Association of Realtors® reported increased sales of pre-owned homes in all regions except the West, where high home prices may be topping out. The Northeast reported 6.70 percent growth in sales; the Midwestern region had the highest rate of sales with growth of 8.40 percent and the South reported 8.30 percent growth in sales of previously-owned homes. The West reported a drop of -2.30 percent in sales of pre-owned homes.

Mortgage Rates, New Jobless Claims Rise

Freddie Mac reported higher average mortgage rates last week. The rate for a 30-year fixed rate mortgage was one basis point higher at 3.94 percent; the rate for a 15-year fixed rate rose two basis points to 3.38 percent. The average rate for a 5/1 adjustable rate mortgage rose three basis points to 3.39 percent. Discount points for fixed rate mortgages averaged 0.50 percent for fixed rate loans and 0.30 percent for 5/1 adjustable rate mortgages.

First-time jobless claims were higher last week with 245,000 new claims filed as compared to last week; reading of 225,000 new jobless claims and expectations of 230,000 new claims.

What‘s Ahead

This week’s economic releases include the Case-Shiller Home Price Index, pending home sales and consumer confidence. Mortgage rates and weekly jobless claims will also be released.

Last week’s economic reporting included readings on inflation, core inflation and the Post-meeting statement of the Fed’s Federal Open Market Committee. Fed Chair Janet Yellen also gave a press conference; weekly readings on mortgage rates and new jobless claims were also released.

Inflation Rises in November

U.S. inflation rose by 0.30 percent to 0.40 percent in November; October’s reading was 0.10 percent and November’s reading met analysts’ expectations. Core Consumer Price Index readings for November posted a gain of 0.10 percent, which fell short of the expected reading and October’s reading of 0.20 percent. Core CPI readings are less volatile as they do not include volatile food and energy sectors.

FOMC Statement: Fed Raises Target Rate

The post-meeting statement of the Federal Reserve’s Federal Open Market Committee cited strong economic signs in its decision to raise the target federal funds range by 0.25 percent to 1.25 percent to 1.50 percent. The Committee indicated that it expects inflation to hold steady in the near term and to stabilize closer to the Fed’s goal of two percent annually in the medium term.

Fed Chair Janet Yellen gave a press conference after the FOMC statement was released. She cited strong labor markets and low unemployment as signs of healthy economic conditions. The Fed’s dual mandate of achieving maximum employment and stable pricing has not been met due to lagging inflation. The Federal Reserve’s goal of 2 percent annual inflation fell short at 1.60 percent year-to-date. Job growth was strong with job growth expanding at a monthly average of 170,000 jobs over the past three months.

The Fed expects the inflation to achieve its 2 percent goal in 2019; unemployment is expected to remain at or near its current rate of 4.10 percent. This was good news as the expected exit of aging workers will increase in coming years as baby-boomers retire. Ms. Yellen affirmed her intention to aid in a smooth transition for the Federal Reserve as incoming Chair Jay Powell prepares to take over in February.

Mortgage Rates, Mixed, Weekly Jobless Claims

Fixed mortgage rates averaged one basis point lower last week with the rate for a 30-year fixed rate mortgage at 3.93 percent. The rate for a 15-year fixed rate mortgage averaged 3.36 percent’ the average rate for a 5/1 adjustable rate mortgages rose one basis point to 3.36 percent. Discount points averaged 0.50 percent for fixed rate mortgages and 0.30 percent for 5/1 adjustable rate mortgages. Analysts said that lenders expected the Fed to raise rates and so factored in an increase of long term loan rates over time.

New Jobless claims dropped by 11,000 last week to 225,000. Analysts had expected 235,000 new claims based on the prior week’s reading of 236,000 new claims.