Prospective Fed Chairman, Janet Yellen, continues to ensure members of the Senate Banking Committee that she favors robust QE measures until the economy and labor market can exhibit strong growth. She told the panel on Thursday “I consider it imperative that we do what we can to promote a very strong recovery.” This has helped to send the equity markets soaring to new record highs but strong improvements elsewhere remain to be seen. While the Fed believes the asset purchases have been nursing the economy back to health, the housing market has flat-lined or in some cases started to retract.
Notably in housing, mortgage applications continued to dwindle from the prior week’s report. Applications dropped 1.8 percent according to the Mortgage Bankers Association (MBA) for the week of November 8th. The prior week’s report was revised down from -7 percent to -2.8 percent. These numbers come of the heels of a higher 30-year average fixed mortgage rate for conforming loans of 4.44 percent compared to 4.32 percent in the prior week. The 30-year fixed mortgage rate averages for Jumbo loans and FHA backed loans also experienced increases that reached monthly highs.
Home builder confidence was reported flat due to rising construction costs this month. The recent spike in interest rates over the last few months has hurt mortgage applications and construction costs are affecting the housing supply. Other factors besides interest rates are influencing home buyers. Rick Judson, NAHB Chairman, said in a release, “Given the current interest rate and pricing environment, consumers continue to show interest in purchasing new homes, but are holding back because Congress keeps pushing critical decisions on budget, tax and government spending issues down the road.”
The number of people looking to purchase a home dropped half a percent according to the purchase index put out by the MBA which is typical in a rising rate environment. Interest rates are still historically low but the continued uncertainty from the Fed and Washington will continue to keep home buyers on the sidelines until more clarity can be seen. The high unemployment numbers also add to the problem. Inevitably this will hurt mortgage application numbers as home buyers sit on the sidelines.
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