Market Recap: Home Prices Appreciate, Fed Leaves Rates Unchanged, and Pending Sales Rise
Posted On April 30, 2021
This week, the Federal Open Market Committee (FOMC) announced that the benchmark interest rate would remain near zero. This marks over one year since the Fed pushed rates down due to the coronavirus pandemic. As a result, mortgage rates remained relatively unchanged. For right now they’re still trending in a historically low range, and the market doesn’t show many indicators of that changing soon.
In other housing news, home prices appreciated at the fastest pace in 15 years and pending home sales increased as well.
In February, the Case-Shiller home price index appreciated at a monthly pace of 1.2% and a yearly pace of 11.9%. That’s the largest increase since 2006. The biggest gains took place in Phoenix (17.4%), San Diego (17%), and Seattle (15.4%). The median increase in prices was $35,000, according to Fannie Mae and Freddie Mac. “Housing market strength is reflecting many of the positive and continually improving signs of the economic recovery, including employment gains, consumer savings and more purchase power among home buyers, all while mortgage rates remain historically low,” said Selma Hepp, chief economist at CoreLogic.
On Wednesday, Fed Chairman Jerome Powell announced that the benchmark interest rate would remain at 0% to 0.25%. He also stated that the Fed will not start slowing the $120 billion per month in asset purchases. Before they discuss tapering, Powell said that they want to see more progress with full employment and inflation stability. He also addressed concerns about a possible housing bubble. “We don’t have that kind of thing where we have a housing bubble where people are over levered,” he said. Instead, he claims the problem is more related to the lack of supply and high demand, and hopes that “over time, housing builders can react to this demand and come up with more supply.”
Pending home sales jumped 1.9% in March and 23.3% year-over-year. Regionally, pending sales increased 6.1% in the Northeast, 2.9% in the South, and 2.9% West. In the Midwest, pending sales declined 3.7%. However, with the projected 10% growth in existing sales by the National Association of REALTORS® (NAR), pending sales are expected to increase as well. “Low inventory has been a consistent problem, but more inventory will show up as new home construction intensifies in the coming months, as well as from a steady wind-down of the mortgage forbearance program,” said Lawrence Yun, chief economist for the NAR. “Although these moves won’t immediately replenish low supply, they will be a step forward.”
Though low inventory is pushing home prices higher, mortgage rates are still very low comparatively. By taking advantage of low rates now, you could save thousands – even if the sales prices drop. For more information on the benefits of buying now, contact us.