Industry News
Mortgage Industry News
Quiet Week for Mortgage Rates
01/28/2011
A week packed with potentially big market moving economic events turned out to be relatively quiet for mortgage rates. There were no major surprises from the Fed meeting, and the economic data was mixed compared to expectations. Strong demand for this week’s Treasury auctions offset concerns about higher food and energy prices, leaving mortgage rates nearly unchanged from last week.
The biggest economic report released during the week was for Gross Domestic Product (GDP), the broadest measure of economic growth. Fourth quarter 2010 GDP increased 3.2%, up from a level of 2.6% in the third quarter. For all of last year, the economy grew 2.9%, the highest level since 2005. Notably, government spending declined during the fourth quarter, while consumer spending picked up significantly. Government stimulus programs have boosted the economy during the past couple of years, but in the long-term it’s the performance of the private sector that will largely determine the strength of the economy. Economists expect consumer spending and business investment to remain healthy this year, and the consensus forecast for 2011 is for GDP growth of 3.2%. This level of growth would be consistent with a gradual decline in the unemployment rate.
The housing sector data released during the work was encouraging. December New Home Sales jumped 18% to the highest level in eight months. The inventory of new homes on the market fell to a 6.9-month supply. December Pending Home Sales, a leading indicator of housing market performance, rose 2% from November, the fifth increase in the last six months. According to the National Association of Realtors (NAR), "modest gains" in the labor market have helped buyers during a period of favorable home affordability levels.
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