Hurdles To Home Purchases Likely To Get Higher, Says Analyst As…

HOmeUnion Chart

IRVINE, Calif.–The “hurdles” to purchasing a home are only going to get higher in 2017, according to one analyst.

Steve Hovland, director of research with HomeUnion, said the strong jobs report for February “nearly guarantees” a rate hike by the Federal Open Market Committee at its March meeting.

“A March rate hike keeps the Fed on track to lift the federal funds rate three times this year, which we forecast after the most recent increase in December,” wrote Hovland. “February’s gains marked the 77th consecutive month that the economy has added new positions, dating back to late 2010 when temporary census workers were removed from payrolls. Wage growth, which has long been cited by the FOMC as a reason to abstain from interest rate hikes, was 2.8% during February. Over the past six months, wages have posted an average year-over-year improvement of 2.7%. Although the Fed would like to see wage growth above 3%, momentum in the sector will keep the FOMC on the current path.”

Despite the wage growth, the gap between how much workers earn and home prices continues to widen, observed Hovland, pointing to January prices for owner-occupied homes that were 11% higher over the past 12 months.

Hovland forecast that an aggressive Fed stance could encourage some financial institutions to act ahead of anticipated movements in the overnight rate.

But he added a caveat, noting, “an unraveling of Dodd-Frank could mute the Fed’s actions in regards to mortgage rates. Given the state of the economy on the eve of the second quarter, we expect the 30-year mortgage rate to end the year in the high-4% area.”

Section: Standard
Word Count: 350
Copyright Holder:
Copyright Year: 2019
Is Based On: