Pending home sales rose 5.5% in February, a 2.6% increase year-over-year. Warm weather and potentially higher interest rates have been said to be the cause.
Home prices roared to the highest levels in nearly 3 years as demand remains strong. Tight inventory continues to be an issue, supporting increasing prices.
Warm winter weather also has led to a surge in new home construction. However, homebuilders are struggling to find enough workers to meet demand.
Consumer confidence surged to a 16+-year high in March. Consumer optimism is supported by a strong labor market and a positive economic outlook.
The GDP increased 2.1% in the 4th quarter, signaling economic growth. Consumer spending accounts for more than 2/3rds of U.S. economic activity.
Some Fed members made comments this week supporting more than 3 rate hikes this year. The majority still favor a gradual approach to increases though.
Builder confidence in the housing market hit a 12-year high in March. Builders are anticipating helpful regulatory reform from the Trump administration.
Housings starts were up in February, helped by unseasonably warm weather. Single-family home construction surged 6.5% to a 9-1/2-year high.
Although permits for future home construction overall were down in February, permits for single-family homes actually increased 3.1% over January.
Although the Fed raised policy rates at this week’s meeting, mortgage rates improved when the Fed forecasted gradual future increases, calming markets.
The Fed’s policy rate change will help tame inflation, which has been on the rise. Inflation can be a factor in increasing future mortgage rates.
The economy is expected to continue to grow, as supported by recent data. The labor market is strong and consumer confidence is improving.
Fannie Mae’s Home Purchase Sentiment Index for February had five of the six components hit record highs, showing continued strength in the housing market.
Consumer confidence in the housing market hit a new all-time high in February. Of those surveyed, 40% say now is a good time to buy a home.
Although tight inventory remains a problem, there may be hope on the horizon. Twenty-two percent of consumers say now is a good time to sell, also a new high.
A Fed policy rate hike next week is now almost 100% certain, after recent comments by Fed officials. The Fed anticipates three rate increases in 2017.
The Fed’s mandate is to keep strong employment and low inflation. Jobs data this week showed the labor market remains strong, with low unemployment.
Inflation is on the rise, both in the U.S. and abroad, as the economy continues to grow. Inflation pressures mortgage rates and could contribute to higher rates.