Shelter Six:  Fed Bumps Rates up .25%

December 24, 2018 by · Leave a Comment 

1. As expected, the Federal Reserve raised the Federal Funds Rate by .25% last week.  Fed officials now expect two rate hikes in 2019, one less than previously forecasted.

2. The most recent inflation data revealed that inflation is still rising but continues to be below the Fed’s stated target level of 2%.

3. The latest news from the housing sector was mixed.  November Existing Home Sales increased more than expected from October, but were 7% lower than a year ago.

4. Inventory fell to a 3.9-month supply, well below the 6.0-month supply that is considered healthy.  The median existing-home price was 4% higher than a year ago.

5. Housing starts rose a solid 3% from October, but the strength came from the multi-unit segment.  Single-family starts dropped 5% to the lowest level since August 2017.

6. In addition, the December NAHB Housing Index showed that home builder confidence declined from 60 to 56, far below the consensus and the lowest level since May 2015.

Rate Update

Continuing concern about the pace of global economic growth was good for mortgage rates and negative for stocks last week.  Rates ended the week slightly lower.

This Week

New Home Sales will be released on Thursday and Pending Home Sales on Friday.  The last week of the year is generally a very light period for the financial markets, which can lead to higher volatility.