||Quiet Holiday Week
The mortgage market was quiet during Christmas week. The few economic reports released this week, including Durable Orders, Jobless Claims, and New Home Sales, were mostly stronger than expected. As a result, mortgage rates ended the week a little higher.
While the headline results for this week’s New Home Sales report revealed a decline from the prior month, this obscured the substantial improvement. New Home Sales dipped slightly in November, but this was from a level in October which was revised substantially higher. In fact, the revised October reading was the highest level since July 2008. November New Home Sales were 17% higher than one year ago. This was another in a string of recent housing market reports which provide reasons to be optimistic heading into 2014. On December 18, the Fed announced that it will begin to scale back its bond purchases. The added demand from the Fed for mortgage-backed securities (MBS) has been a major factor helping to keep mortgage rates low, so a reduction in bond purchases is clearly negative for mortgage rates. Considering this, it is interesting to see that mortgage rates have moved only a little higher since the Fed announcement. In other words, the taper was almost completely priced in to mortgage rates ahead of the actual announcement. By contrast, the reaction in the stock market to the Fed statement was much larger. Investors were pleased that the Fed intends to hold the fed funds rate low until much greater labor market improvement is seen, and the Dow stock index has climbed roughly 600 points to a record high.