US mortgage rates remained unchanged on Tuesday as financial markets remained stuck in a sideways pattern. Although mortgage rates have shown changes during the last week in December in the past when bond markets experienced an imbalance of buyers and sellers, that condition usually does not occur. Lenders are not expected to post any rate changes during the remainder of the week, barring some unexpected news.
Underlying economic indicators were mixed on Tuesday. Major stock markets declined slightly, the price of gold increased for the third straight day, the price of oil increased slightly, and the yield on 10-year Treasury notes dropped slightly.
The major economic news was the release of the Case-Shiller Home Price index for October. The index showed a 6.2% surge in home prices, which is almost three times the rate of inflation.
Commenting on the rise in home prices, S&P Dow Jones Indices Managing Director and Chairman of the Index Committee David M. Blitzer said that the rising new and existing home prices could be attributed to low levels of unemployment, ongoing economic growth, and low interest rates.
He added: "Some of these favorable factors may shift in 2018. The Fed is widely expected to raise the Fed funds rate three more times to reach 2 percent by the end of the New Year. Since home prices are rising faster than wages, salaries, and inflation, some areas could see potential home buyers compelled to look at renting. Data published by the Urban Institute suggests that in some West Coast cities with rapidly rising home prices, renting is more attractive than buying."
It is not yet clear what impact rising home prices will have on mortgage rates. Strong economic growth often results in rate increases. However, rising home prices can make homes less affordable, resulting in a decrease in demand for home purchases and a reduction in mortgage rates as fewer consumers enter the mortgage market. It may not be until mid-January that any momentum in rates becomes defined.
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