Housing and Inflation in the Spotlight as 2016 Begins
The last batch of data released on housing activity showed that we are ended 2015 at better levels than in 2014, but below the best levels of the year. A surprising 11% drop in existing home sales in November can be, at least partially, attributed to longer closing times resulting from new closing disclosure regulations.
While existing home sales dropped sharply, NAR’s Pending Home Sales Index for November was nearly unchanged. This index measures contracts to buy existing homes which were signed during the month and is not influenced by new regs. Fannie Mae projects the improvement in housing activity seen in 2015 will continue in 2016 with a 3.9% increase in total homes sales.
The most recent inflation readings showed that in November inflation remained well contained, at an annual rate of just 1.3%. Both low commodity prices and a stronger dollar have helped keep inflation low in 2015. However, the effect these have on inflation is transitory. Unless commodity prices continue to fall or the value of the dollar continues to rise, future readings will not reflect these benefits. The Fed’s effectiveness at keeping expectations for future inflation low will influence mortgage rates in 2016.
Factors: The all-important monthly Employment report will be released on Friday. As usual, this data on the number of jobs, the unemployment rate, and wage inflation will be the most highly anticipated economic data of the month.
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