Weekly Economic Update - 3.28.18
I hope you are having a great week so far.
RATE MOVEMENT (from prior week) UNCHANGED
Although the stock market suffered large losses last week, mortgage markets were relatively quiet. The two primary influences were the Fed meeting and a new tariff policy. Neither had much net effect and mortgage rates finished the week nearly unchanged.
IMPORTANT ECONOMIC FACTORS:
Federal Reserve - Fed Chair Jerome Powell's first press conference left investors divided about whether there will be three or four federal fund rate hikes this year. As widely expected, the first 25 basis point hike in 2018 took place at this meeting. Investors were much more interested in the projections of Fed officials for the pace of future rate hikes. Seven out of fifteen officials now expect that four rate hikes will be needed this year, up from just four officials in the last set of forecasts in December. The projected pace of raising rates in coming years increased as well. It appears that the forecasts were roughly in line with expectations, and mortgage rates had little change on this news.
White House/Chinese Tariff – On Thursday, the Trump administration announced that it will impose new tariffs on about $50 billion worth of Chinese imports. This was a less aggressive plan than investors had feared, but it still increased concerns about retaliation. A trade war likely would have multiple effects. One would be reduced global economic activity, which would be bad for stocks and good for mortgage rates, as it would reduce the outlook for future inflation. However, tariffs also raise the price of imported goods, which would increase inflationary pressures. In short, the threat of a trade war was viewed as clearly negative for stocks, but the overall impact on mortgage rates is difficult to predict.
Housing Data - The data from the housing sector was pretty good and could have been even better except for severe weather in the Northeast and Midwest. In February, sales of previously owned homes increased 3% from January and were a little higher than a year ago. The inventory of homes for sale rose 5% to a 3.4-month supply, but it was 8% lower than a year ago. The median existing-home price was 6% higher than a year ago.
Looking ahead, it should be a “quiet” week for mortgage markets as we have light data and the markets close early on Thursday and will be closed on Friday in observance of Good Friday.
Please let me know if you have any questions in regards to this.
Thank you for your continued support, have a productive week.
SVP, Regional Manager
The Crawford Team