This week’s Fed meeting caused some volatility but had almost no net effect on mortgage rates. The economic data caused little reaction. Mortgage rates ended the week very slightly higher.
The statement released on Wednesday following the conclusion of the Fed meeting contained little new guidance about future policy. According to the statement, officials expect to begin to scale back (taper) the Fed’s holdings of Treasury and mortgage securities “relatively soon.” Many investors think that the Fed will announce the tapering at the next meeting on September 20. As expected, the Fed made no change in the federal funds rate. Officials provided little indication that the low inflation readings seen in recent months have altered their outlook for the pace of future rate hikes.
On Friday, the first reading for second quarter gross domestic product (GDP), the broadest measure of economic activity, was 2.6%, which was very close to the consensus forecast. First quarter GDP was revised lower to 1.2% from 1.4%. During the second quarter, strength was seen in the key areas of consumer spending and business investment.
The large improvement during the second quarter was great news for the economy. However, since it was right on target with the expected levels, there was little market reaction.
Monday’s report on home sales activity showed that little has changed over the last few months. In June, sales of existing homes were at roughly the same level as in April and May. They were slightly higher than a year ago. The inventory of existing homes for sale was at just a 4.3-month supply and was 7% lower than a year ago. The median existing-home price was 7% higher than a year ago.
Looking ahead, the important monthly Employment report will be released on Friday. As usual, this data on the number of jobs, the unemployment rate, and wage inflation will be the most highly anticipated economic data of the month.
Vice President of Mortgage Lending
NMLS ID # 399335
Phone: (415) 549-8757
Cell: (415) 306-4466