A variety of factors influenced mortgage rates over the past week. Anticipation of the Fed statement, an improved outlook for European economic growth and reduced concerns about Greece, combined to cause mortgage rates to end the week higher.
The Fed statement released Wednesday contained no surprises. As expected, the Fed removed the last reference to a specific date regarding a federal funds rate hike. Going forward, Fed officials will decide at each meeting whether to raise rates based on the performance of the economy. Mortgage rates recovered some of their losses after the news.
Gross Domestic Product (GDP), the broadest measure of economic activity, increased at an annualized rate of just 0.2% during the first quarter, down from 2.2% during the fourth quarter. Unusually bad winter weather, port disruptions, lower energy prices and the stronger dollar were the major factors behind the weak first quarter figures. In recent years, GDP growth has been slowest in the first quarter, followed by better results for the rest of the year.
March Pending Home Sales increased for the third straight month to the highest level since June 2013. Pending sales were 11% higher than a year ago. Since this report measures signed contracts for the sale of existing homes, it is indicating continued improvement in future housing market activity.
Looking ahead, the Core PCE price index will be released on April 30. This is the Fed’s preferred inflation indicator. The ISM national manufacturing index will come out on May 1. The companion report, the ISM Services index, will be released on May 5. The next Employment Report is scheduled for May 8.