January 25, 2022 – Fed Meeting This Week. The importance of each monthly meeting of the Federal Reserve Board ebbs and flows.

Economic Commentary

Fed Meeting This Week. The importance of each monthly meeting of the Federal Reserve Board ebbs and flows in relation to the economic environment surrounding each meeting. When the pandemic first hit and major parts of the economy shut down, all eyes were on the Fed as they came to the rescue. Since that time, each meeting became more or less the same old story — until recently.

This week the Fed meets for the first time in 2022, and there are lots of questions swirling around the event. The main topic will be inflation. High levels of inflation have caused the Fed to move more quickly to remove their support for the economic recovery. Late last year they started tapering their purchases of bonds and mortgages. Then they increased the pace of tapering and talked of rate increases in 2022. What next?

Fed watchers will be looking hard at any hint regarding the timing of the first increase. Most are not expecting it to happen this week, with March the betting favorite right now. In addition to the Fed meeting, we will also see the first estimate of economic growth for the 4th quarter. This will be followed by the jobs report for January, to be released at the end of next week. This “trifecta” of economic events may tell us more about the direction of the economy and interest rates starting off the year.

Weekly Interest Rate Overview

The Markets. Mortgage rates continued to climb in the past week, though there was some moderation which increased hopes for stabilization after the survey was released. For the week ending January 20, 30-year rates moved up to 3.56% from 3.45% the week before. In addition, 15-year loans rose to 2.79% and the average for five-year ARMs increased to 2.60%. A year ago, 30-year fixed rates averaged 2.79%, more than .75% lower than today. Attributed to Sam Khater, Chief Economist, Freddie Mac, “Mortgage rates moved up again as the 10-year U.S. Treasury yield rose and financial markets adjusted to anticipated changes in monetary policy that will combat inflation. As a result of higher mortgage rates, purchase demand has modestly waned in advance of the spring homebuying season. However, supply remains near historically tight levels and home prices remain high, keeping the market competitive”  Note: Rates indicated do not include fees and points and are provided for evidence of trends only. They should not be used for comparison purposes.

Real Estate News

Home prices may be growing faster than rents in most places across the country, but homeownership still beats renting financially, shows a new study from ATTOM Data Solutions, a real estate data firm. Owning a median-priced home is more affordable than the average rent of a three-bedroom property in 58% of 1,154 counties tracked in the report. Researchers analyzed fair market rent data estimates for 2022, wage data, and public record sales deed data for single-family home sales in the counties tracked. Home prices have increased by more than 10% in most of the country over the past year as high demand and low housing inventories have moved prices higher. On the other hand, average wages have increased about 8% in comparison. Interest rates have hovered around 3%, which have helped with homeownership affordability, researchers note. “Home prices are rising faster than both rents and wages, while wages rise faster than rents,” says Todd Teta, chief product officer with ATTOM. “And the housing market boom of the past decade keeps pushing home values to new records. Yet homeownership still remains the more affordable option for average workers in a majority of the country because it still takes up a smaller portion of their pay. The trend is slowly shifting toward renters, which could be a major force in easing price increases in 2022. Prices can only go up by so much more before renting becomes financially easier. For now, though, rising wages and interest rates around 3 percent are enough to offset recent price run-ups and keep ownership on the plus side of the affordability ledger compared to renting.” Source: ATTOM Data Solutions

United Van Lines released its annual study that uses exclusive data to track customers’ state-to-state migration patterns. The company’s 45th Annual National Movers Study indicated that Americans were on the move in lower-density areas and to be closer to their families throughout the last year. The study found that Vermont had the highest percentage of inbound migration (74%). Topping the list of outbound migrations was New Jersey (71%), which has held that spot for the past four years. In addition to collecting state-by-state data, United Van Lines also issues an accompanying survey to analyze the motivations and influences of Americans’ interstate moves. The results indicated that 31.8% of Americans who moved did so in order to be closer to their family — a new trend coming out of the pandemic, as priorities and lifestyle choices shift. Also, 32.5% of Americans moved for a new job or job transfer, which is a significant decrease from 2015 when more than 60% of Americans cited a job or transfer. “This new data from United Van Lines is indicative of COVID-19’s impact on domestic migration patterns, with 2021 bringing an acceleration of moves to smaller, mid-sized towns and cities,” said Michael A. Stoll, economist and professor in the Department of Public Policy at the University of California, Los Angeles. “We’re seeing this not only occur because of Americans’ desire to leave high-density areas due to risk of infection, but also due to the transformation of how we’re able to work, with more flexibility to work remotely.” Source: National Mortgage Professional

With inflation rising to its highest level in nearly 40 years, three-quarters of buyers and sellers say they are changing their plans, according to a new consumer survey of 1,500 aspiring buyers and sellers conducted by Redfin. Twenty-nine percent of survey respondents say they are delaying buying a home due to inflation. On the other hand, about a quarter of aspiring buyers say that inflation is prompting them to accelerate plans to make a purchase in real estate, the survey shows. Ten percent of respondents say that inflation is prompting them to move up their home selling plans, 7% are delaying selling, and 3% are nixing the idea of selling. “The way Americans interpret news about rising prices can have a variety of effects on their financial decisions, including homebuying,” says Daryl Fairweather, Redfin’s chief economist. “Some people may delay buying because they’re worried that with prices rising on everything from food to fuel, now is not the right time to make a huge purchase. But others might move faster to find a house because they’re worried home prices and rent prices will increase even more, and they want to lock in a fixed payment.” Source: Redfin