The short holiday week was a relatively quiet period for mortgage rates. A large batch of economic reports on Wednesday had little impact, and rates remained near record low levels.
Sales of new homes continued at a blistering pace in October. The following weakness during the spring due to the partial shutdown of the economy, new home sales have maintained an annualized rate of around one million units for four straight months, the best levels since 2006. Builders say that they are putting up new homes as quickly as possible, but that a lack of land, labor, and materials is limiting the pace of construction.
The reduced economic activity resulting from the pandemic has caused a decline in inflation, which has helped keep mortgage rates low. In October, the core PCE price index was just 1.4% higher than a year ago, down from an annual rate of increase of 1.5% last month. Core PCE is the inflation indicator favored by Fed officials, and their stated target is 2.0%.
On Tuesday, the Federal Housing Finance Agency (FHFA) announced that the baseline conforming loan limit for Fannie Mae and Freddie Mac mortgages in 2021 will increase by 7.5% from $510,400 to $548,250. The new limit for most high-cost areas will be $822,375 or 150% of $548,250. With the continued strength in the housing market and rising home values, this will be the fifth consecutive year of increases.
Looking ahead, investors will continue watching Covid case counts, progress on vaccines, and government stimulus measures. Beyond that, the monthly Employment report will be released on December 4, and these figures on the number of jobs, the unemployment rate, and wage inflation will be the most highly anticipated economic data of the month. Mortgage markets will be closed on Thursday and will close early at 2:00 et on Friday for Thanksgiving.