Uncategorized January 7, 2019

Key Economic Indicators that Affect Mortgage Interest Rates

Throughout the year, reports are released that provide updates on the current state of the economy and offer insight into potential economic trends. Because economic indicators can cause mortgage rates to move, it’s helpful for homebuyers, owners and refinancers to understand economic news in order to make more informed financial decisions. Take a look at three housing reports that indicate the health of the economy.

Case-Shiller Index

Home prices are a huge indicator of how the economy as a whole is performing. The Case-Shiller Index is actually comprised of four indices; the National Home Price Index, 20-city composite index, 10-city composite index and 20 individual metro indices. These indices track the changes in price for sales of the same single-family homes over time in large markets throughout the country. It is published on the last Tuesday of each month and has a two-month lag time, so the index released in March will show data from February and January.

The Case-Shiller Index tells us whether home prices are increasing or decreasing throughout the country, and keeping an eye on the data could help you better time your purchase. If prices are increasing, you may decide to purchase quickly while your preferred home is within budget. Conversely, you may choose to hold off a little longer in hopes of a better deal if prices seem to be on their way down.

For more information on The Case-Shiller Index, click here.

MBA Purchase Index

Each week, the Mortgage Bankers Association (MBA) releases its Purchase Index, which measures the amount of home loan applications submitted nationwide – different from the number of homes purchased or loans closed – and is reported as a percentage increase or decrease from the previous week. The index reports on the factors that influence mortgage applications, such as interest rates, home prices, credit availability and all-cash homebuyers.

The MBA Purchase Index is considered to be one of the leading indicators of the health of the housing market. It helps housing economists and homebuilders forecast home sales, and lenders use the index to gauge the amount of applications they are receiving compared to the overall U.S. mortgage activity.

New Residential Construction Report

Every month, the U.S. Census Bureau and the U.S. Department of Housing and Urban Development (HUD) issue the New Residential Construction Report. This report is derived from surveys of homebuilders nationwide and includes data on housing starts, building permits and housing completions. Similar to the MBA’s Purchase Index, this data is presented as a percentage change from the prior month and year-over-year period.

Housing starts and building permits are considered leading indicators of growth for the housing industry and the data provides insight into the current state of the economy. Increases in new residential construction means there’s a higher demand for homes to purchase, which often leads to homebuyers spending more money on other consumer durable goods, such as home appliances and furniture. The more homes being built, the healthier the market .

To view the latest New Residential Construction Report, click here.

Article originally found on RPM Mortgage.