From Stuart Crawford at V.I.P. Mortgage Inc. -
Last week investors were focused on Thursday's European Central Bank (ECB) meeting. The ECB announced a highly anticipated new bond purchase program, and there was a lot of volatility around the announcement. Although, it had little net effect, and mortgage rates ended the week just a little lower.
Beginning in March, the ECB will purchase 60 billion euros ($69 billion) per month of public and private bonds. The bond buying will continue at least through September 2016. Most of the purchases are expected to be sovereign bonds of Eurozone countries. This program will be similar to the quantitative easing (QE) measures used by our Federal Government recently (which we are now in the process of “unwinding”). In recent months, the prospect of this added demand from the ECB pushed global bond yields lower, helping our mortgage rates. Since there were no significant surprises in the details of the program, the announcement had little net effect on mortgage markets last week.
The housing data for December showed that we head into 2015 at a faster pace than at this time last year. Existing Home Sales are 4% higher than one year ago, and Single-family Housing Starts are at their best level since March 2008. Building Permits (a leading indicator of future activity) also are higher than one year ago. Headwinds for housing market activity in 2015 include a low inventory of existing homes for sale and higher home prices. Median existing home prices rose in 2014 to the highest level since 2007. Mortgage rates are certainly not an issue, as they are now lower than at any time last year.
This week could be very volatile in the markets with the Greek elections taking place, and may indicate an increased level of support for Greece to leave the European Union. Domestically, the next Fed meeting will be on Wednesday, and investors will be looking for hints about the expected timeline for fed funds rate hikes. The first reading for fourth quarter GDP (the broadest measure of economic activity) will come out on Friday, and New Home Sales and Pending Home Sales will round out the busy schedule.
Stuart can be reached at 480.776.2954