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What to Expect for Mortgage Rates This Week – September 25th, 2023

In the latest round of economic updates, we delved into the state of the U.S. housing market, scrutinizing indicators like housing starts, building permits, and the Federal Reserve’s post-meeting statement from the Federal Open Market Committee. This comprehensive review also encompassed data on the sale of pre-owned homes, along with the regular reports on mortgage rates and jobless claims.

Home Builders’ Confidence Dampened by Rising Mortgage Rates

The confidence of homebuilders took a hit in September as they assessed the conditions in the U.S. housing market. The index for September stood at 45, falling short of the anticipated 49.5 and slipping from August’s reading of 50. The dual challenge of escalating mortgage rates and soaring home prices posed significant obstacles for first-time and moderate-income buyers. Meanwhile, homeowners held off on listing their properties, eagerly awaiting more favorable mortgage rates. This situation, coupled with low inventories of pre-owned homes for sale, pushed potential buyers to contemplate new home purchases. In a bid to entice buyers, homebuilders increased their price cuts, with reductions averaging 32 percent in September, compared to 25 percent in August. Additionally, the National Association of Home Builders (NAHB) revealed that 59 percent of homebuilders were offering various buyer incentives beyond price reductions.

Building Permits on the Rise, Housing Starts Decline in August

August witnessed an upswing in building permits, with the Commerce Department reporting 1.54 million permits issued, surpassing July’s 1.44 million permits. This figure exceeded analysts’ expectations, which had predicted 1.45 million permits for August. However, housing starts retreated to 1.28 million in August, a drop from July’s 1.44 million starts and lower than the expected 1.43 million housing starts.

Previously Owned Home Sales Dip in August

In August, sales of pre-owned homes amounted to 4.04 million, down from July’s 4.07 million and below the projected 4.10 million sales.

Federal Reserve Keeps Key Interest Rates Steady

The Federal Open Market Committee (FOMC) opted to maintain the federal funds rate range at 5.25 to 5.50 percent, although they hinted at a potential rate hike before the close of 2023. FOMC members rely on an array of domestic and global financial and economic data to inform their decision-making process.

Mortgage Rates Surge, Jobless Claims Decline

Freddie Mac reported last week that fixed mortgage rates had breached 7 percent. The average rate for 30-year fixed-rate mortgages edged up by one basis point to reach 7.19 percent, while 15-year mortgages saw a three basis point increase to 6.54 percent. On the employment front, first-time jobless claims dropped to 201,000 claims, down from the prior week’s 221,000, and below the expected 225,000 claims.

Looking Ahead

In the upcoming week, our focus will be on a fresh set of economic reports. These include readings on new home sales, S&P Case-Shiller home price indices, the Federal Reserve Chair’s anticipated speech, and inflation reports. We’ll also be keeping an eye on weekly updates for mortgage rates and jobless claims.

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