Rates Increase for Second Week, Consumer Spending Remains Resilient
Mortgage rates increased thirteen basis points according to the Freddie Mac Primary Mortgage Market Survey released December 26th. This is on top of last week’s 12 basis point increase. While a slight improvement in new and existing home sales is encouraging, the market remains plagued by an overwhelming undersupply of homes. A strong economy can help build momentum heading into the new year and potentially boost purchase activity.
MBA Mortgage Applications Index – MBA Offices will be closed beginning on Wednesday, December 25, 2024, and will reopen on Thursday, January 2, 2025. Due to the office closing and holidays, the results for weeks ending December 20, 2024, and December 27, 2024, will both be released on Thursday, January 2, 2025.
U.S. consumer spending increased in November amid strong demand for a range of goods and services, underscoring the economy’s resilience, which saw the Federal Reserve this week projecting fewer interest rate cuts in 2025 than it had in September. The Core PCE report from the Commerce Department on Friday showed moderate monthly rises in prices, with a measure of underlying inflation posting its smallest gain in six months. Nonetheless, the annual increase in core inflation, excluding food and energy, remained stubbornly well above the U.S. central bank’s 2% target. “The economy continues to grow from strong consumer demand as income growth and the wealth effect from higher portfolio values give consumers capacity to spend,” said Jeffrey Roach, chief economist at LPL Financial. “Inflation was more benign than expected but the stickiness of some categories supports the Fed’s hesitancy to materially lower rates next year.”
Sales of new U.S. single-family homes rebounded in November after being depressed by hurricanes in the prior month, but rising mortgage rates could hamper sales next year. New home sales jumped 5.9% to a seasonally adjusted annual rate of 664,000 units last month, the Commerce Department’s Census Bureau said on Monday. The sales pace for October was revised higher to a rate of 627,000 units from the previously reported 610,000 units. Economists polled by Reuters had forecast that new home sales, which account for about 15% of U.S. home sales, would rebound to a rate of 660,000 units. New home sales are counted at the signing of a contract and can be volatile on a month-to-month basis. They increased 8.7% year on year in November.
