The short holiday week was a relatively quiet period for mortgage rates, though the United States economy saw strong new home sales.
Impact of Strong New Home Sales
A large batch of economic reports on Wednesday had little impact. As a result, mortgage rates remained near record low levels.
Strong new home sales continued at a blistering pace in October. This is in spite of economic weakness, following the spring’s partial economic shutdown. New home sales have an annualized rate of around one million units for four straight months. These are the best levels since 2006.
Builders say that they are putting up new homes as quickly as possible. However, the construction pace is limited by a lack of land, labor, and materials.
Reduced Economic Activity
Reduced economic activity resulting from the pandemic has caused a decline in inflation. This has helped keep mortgage rates low.
In October, the core PCE price index was just 1.4% higher than a year ago. This number is down from an annual rate of increase of 1.5% last month. The Fed officials favor core PCE as their inflation indicator. Their stated target is 2.0%.
On Tuesday, the Federal Housing Finance Agency (FHFA) announced that the baseline conforming loan limit for Fannie Mae and Freddie Mac mortgages in 2021 will increase by 7.5%. Thus, the baseline conforming loan limit will increase from $510,400 to $548,250.
The new limit for most high-cost areas will be $822,375 or 150% of $548,250. Overall, the housing market continues its strong push forward, accompanied by rising home values. As a result, this will be the fifth consecutive year of increases.
Looking Ahead After Strong New Home Sales
Investors will continue watching COVID-19 case counts, progress on vaccines, and government stimulus measures. Looking ahead, the monthly employment report will be released on December 4.
The figures on the number of jobs, the unemployment rate, and wage inflation will be highly anticipated. Mortgage markets were closed on Thursday and closed early at 2:00 EDT on Friday for Thanksgiving.
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