Amidst the typical first week of the month cascade of fresh economic data, Federal Reserve Chair Powell spoke to the Congress in his semi-annual monetary policy report (formerly known as Humphrey-Hawkins testimony). His prepared remarks were as short and simple as any in recent memory, revealed nothing new regarding the Fed's intentions for monetary policy, and read like an abbreviated version of his opening remarks after the close of the January Fed meeting. The central bank's rate-setting committee meets again in two weeks, and it's likely that the messaging then will be something more substantive and consequential.
In his State of the Union speech, President Biden floated a proposal for a series of tax credits aimed at first-time home buyers and certain sellers. As with all such lofty proposals, the devil is in the details, and there simply isn't enough information available yet to do any kind of analysis or try to determine its value. At its face, it appears as though it would create rather more immediate demand from potential first-time homebuyers; however, demand is not what the market is lacking now, and more folks rushing to buy homes may simply further inflate home prices. At the same time, it also appears to reward those who were able to make the difficult and expensive jump to homeownership in the current climate, but unless there is some way a tax credit can be converted into claimable income, it doesn't appear to do anything to make qualifying at today's rates and home prices any easier. We'll reserve judgement until more details become available, but even when or if they do, any such proposal will need to make it through a highly dysfunctional Congress before becoming law, and the odds of this occurring seem slim right now.
In the meanwhile, there's the current housing market with which to concern ourselves. According to the Mortgage Bankers Association, requests for mortgage credit improved by 9.7% in the week ending March 1, more than erasing a decline in the last week of February. With the spring housing season underway, it's unsurprising that applications for funds to purchase homes rose by 10.6%, but it is a little surprising that those to refinance existing mortgages also managed to increase, and by 8.1% at that. With economic data as stable and solid as what we've been seeing lately, it's hard to expect that significantly lower mortgage rates will be available for mortgage shoppers this spring, but we'll know more about that after the next Fed meeting.
The economic calendar this week is certainly lighter, but not vacant by any means. We'll get important February updates on inflation from the Consumer and Producer Price Indexes and on Import and Export costs, the last updates on prices before the upcoming Fed meeting. After weeks of re-adjusting positions, it would appear that investors have now gained a level of comfort about the path for monetary policy, and interest rates have found some space to settle of late. With this in mind and based upon how bond markets moved toward the end of last week, it would appear that another small decline in mortgage rates may be on tap for the week, erasing a little bit more of the modest February run-up. We think there will be another 6-8 basis point decline in the average offered rate for a conforming 30-year FRM as reported by Freddie Mac on Thursday.
In his State of the Union speech, President Biden floated a proposal for a series of tax credits aimed at first-time home buyers and certain sellers. As with all such lofty proposals, the devil is in the details, and there simply isn't enough information available yet to do any kind of analysis or try to determine its value. At its face, it appears as though it would create rather more immediate demand from potential first-time homebuyers; however, demand is not what the market is lacking now, and more folks rushing to buy homes may simply further inflate home prices. At the same time, it also appears to reward those who were able to make the difficult and expensive jump to homeownership in the current climate, but unless there is some way a tax credit can be converted into claimable income, it doesn't appear to do anything to make qualifying at today's rates and home prices any easier. We'll reserve judgement until more details become available, but even when or if they do, any such proposal will need to make it through a highly dysfunctional Congress before becoming law, and the odds of this occurring seem slim right now.
In the meanwhile, there's the current housing market with which to concern ourselves. According to the Mortgage Bankers Association, requests for mortgage credit improved by 9.7% in the week ending March 1, more than erasing a decline in the last week of February. With the spring housing season underway, it's unsurprising that applications for funds to purchase homes rose by 10.6%, but it is a little surprising that those to refinance existing mortgages also managed to increase, and by 8.1% at that. With economic data as stable and solid as what we've been seeing lately, it's hard to expect that significantly lower mortgage rates will be available for mortgage shoppers this spring, but we'll know more about that after the next Fed meeting.
The economic calendar this week is certainly lighter, but not vacant by any means. We'll get important February updates on inflation from the Consumer and Producer Price Indexes and on Import and Export costs, the last updates on prices before the upcoming Fed meeting. After weeks of re-adjusting positions, it would appear that investors have now gained a level of comfort about the path for monetary policy, and interest rates have found some space to settle of late. With this in mind and based upon how bond markets moved toward the end of last week, it would appear that another small decline in mortgage rates may be on tap for the week, erasing a little bit more of the modest February run-up. We think there will be another 6-8 basis point decline in the average offered rate for a conforming 30-year FRM as reported by Freddie Mac on Thursday.