April Housing Starts, April Consumer Price Index, Mortgage Rates
May 17, 2016
Tuesday – May 17
April Housing Starts jumped 6.6% from March to an annual rate of 1.17 million units versus the 1.128 million units expected. However, the April Housing Starts rate was 1.7% below the April 2015 number of 1.192 million. Building Permits, a sign of future construction, rose 3.6% to an annual rate of 1.11 million, below the 1.13 million expected. The better-than-expected numbers signal that the economy could be reigniting in the second quarter.
The April Consumer Price Index (CPI) rose at its fastest rate since February 2013, rising 0.4% versus the 0.3% expected, due to higher gasoline prices and rising rents. The Core CPI, which strips out volatile food and energy, rose 0.2% which was in line with expectations. Annually, CPI rose 1.1% from the 0.9% in March, while the Core rate was up 2.1% after the 2.2% increase in March. The Federal Reserve will be closely watching the inflation rate to determine whether or not to raise rates in June. Currently, traders are placing just an 11% chance of an interest rate hike at the June Federal Open Market Committee meeting.
Speaking at a conference in New York City this week, Mike Fratantoni, chief economist for the Mortgage Bankers Association, said that mortgage rates will hover near the 4% level for the next year. Mr. Fratantoni’s message comes despite the possibility of the Federal Reserve raising interest rates later in the year. Mortgage rates continued to be held low as the Federal Reserve conducts ongoing weekly purchases of Mortgage Backed Securities in an effort to spur on economic growth.