Market Update – February 22, 2016

 

Across the country, builders are still breaking ground on new homes, though the number has declined thanks, in part, to Mother Nature. The good news is that more than one million homes are waiting to be built.

January Housing Starts hit a three-month low. Starts, which measure the beginning of excavation on a home's foundation, fell 3.8 percent from December to an annual rate of 1.099 million units. This was lower than the 1.171 million expected. All four major regions across the country saw declines, but a big East Coast snowstorm caused a halt in some late-month construction in the area. In line with expectations, January Building Permits, a sign of future construction, hit 1.202 million units.

In other news, key regional manufacturing data from New York and Philadelphia continues to paint a bleak picture with yet another month of contraction. The sector is still being weighed down by a stronger dollar and weak overseas demand, which are plaguing expectations of future business conditions for the first half of this year.

Finally, the January Core Consumer Price Index (CPI), which is an inflation measure that strips out volatile food and energy, rose 0.3 percent. This was the largest gain since August 2011. Year-over-year, Core CPI rose by 2.2 percent, the largest increase since June 2012. Blame rising rents and higher medical costs.

Why is this important? Inflation has been a non-issue for many years. If January's increase becomes a trend rather than a one-time pop in inflation, home loan rates could move higher. Rates are tied to Mortgage Bonds, and inflation reduces the value of fixed investments like Bonds.

For now, home loan rates remain near historic lows.

If you or someone you know has any questions about buying or selling a home, please don't hesitate to contact me.

Posted on February 22, 2016 at 6:00 pm
Randy Jeremiah | Category: Uncategorized

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