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Last Week in Review

While many parts of the nation were dealing with icy conditions last week, the markets were heating up with a wide range of economic reports and another taper announcement by the Fed.


Table Source: Vantage Production, LLC


There was a mix of good and bad housing news last week, as pending home sales were down 8.7 percent in December from November. The report cited harsh weather for the decline. New home sales also fell by 7 percent from November to December, to an annual rate of 414,000. While the December number was below expectations, there was good news for 2013 overall, as builders sold an estimated 428,000 new homes—16 percent more than in 2012.

Research firm CoreLogic also reported that completed foreclosures declined 14 percent from December 2012 to December 2013. However, the Case Shiller 20-City Home Price Index fell by 0.1 percent from October to November, the first decline since October to November of 2012. Overall, the housing market continues to improve.
 
Also of note, December durable goods orders (orders for items that last for an extended period of time) fell by 4.3 percent, the biggest decline since July. Meanwhile, Gross Domestic Product (GDP) in the fourth quarter of 2013 rose by 3.2 percent. This was above expectations, but below the 4.1 percent recorded in the third quarter of last year. The gains were led by a burst of consumer spending and an uptick in business investments. This is significant, as GDP is the broadest measure of economic activity. And inflation continues to remain tame, according to the Personal Consumption Expenditures Index.

What does this mean for home loan rates? Despite some weak economic reports, the Fed decided to taper its bond purchase program by an additional $10 billion, noting that economic activity has picked up and the labor market continues to improve. Beginning in February, the Fed will now be purchasing $35 billion in treasuries and $30 billion in mortgage bonds (the type of bonds on which home loan rates are based). These purchases have been designed to stimulate the economy and housing market, and the figure is now down from the $85 billion in bonds and treasuries the Fed had been purchasing last year.

The timing of further tapering by the Fed will impact stocks, bonds and home loan rates throughout the year. It is a key story to monitor as we move further ahead in 2014.

Now remains a great time to consider a home purchase or refinance, as home loan rates remain attractive compared to historical levels.

Forecast for the week

Jobs data will be front and center this week, along with a key manufacturing report. 

  • On Monday, the ISM Manufacturing Index was released, a critical report to watch for any signs of a slowdown in early 2014.  
  • Wednesday brings the ISM Services Index and the ADP Report.
  • As usual, Weekly Initial Jobless Claims will be released on Thursday. Last week’s number was the highest since mid-December. 
  • That leads us to Friday's Non-Farm Payrolls and the Unemployment Rate, which will be closely reviewed by both Wall Street and the Federal Reserve.   

As you can see in the chart below, CoreLogic reported that there were 45,000 completed foreclosures across the nation in December 2013. This is a 14 percent year-over-year decline from the 52,000 foreclosures completed in December 2012. The foreclosure arena continues to move in a positive direction due to higher home prices and an improving economy, and I will continue to monitor this closely.

Chart: CoreLogic Foreclosure Report


Table Source: Vantage Production, LLC


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