3221 Harrison Pike Chattanooga, TN 37406 Phone (423) 624-9992 | Fax (423) 624-9435
www.hbagc.net
State & National Updates
Eye on the Economy

Rising Rates a Challenge for 2017

 

Economic conditions continue to mirror market reactions to the post-election environment. For example, the 10-year Treasury rate has risen from 1.8% in early November to approximately 2.4% this week. Rates escalated on the prospects of increased growth in a tight labor market. This higher cost of capital has pushed up mortgage rates (30-year fixed-rate mortgages jumped from 3.5% to 4.2% in recent months). And rising rates have already had an affect on pending homes sales which decreased 2.5% in November, 0.4% lower than a year ago.

 

However, it is important to keep in mind that rising rates are the result of improving economic growth prospects. Similar to the NAHB/Wells Fargo Housing Market Index, many market measures are showing post-election strength. For example, consumer confidence increased in December to the highest level since 2001. These trends reflect the broader economic challenge for 2017: a delicate balance of improved growth prospects and rising interest rates.

 

–NAHB Chief Economist Robert Dietz

 

Economic Insights

Consumer Confidence Reaches Post-Recession High

Assessments of current conditions declined but consumers are optimistic for the near future.

 

Employment Situation – Good Enough

Payroll employment rose by 156,000 in December.

 

FOMC December Meeting – The Devil is in the Details

Federal Open Market Committee members note the pace of economic growth will depend on several key policy changes from the Trump administration. 

 

Housing Trends

 

Age of Housing Stock by State

Median ages of homes range from as young as 20 years (Nevada) to as old as 57 years (New York).

 

Mortgage Rates Climb

Average rates on all loans increased in November from 3.60% to 3.64%.

 

Market Growth Expected Following Modest Construction Pace

Aging housing stock signals growing demand for remodeling projects and new construction.

 

Starts and Sales

 

Home Price Gains Continued in October

Tight inventory and high demand brought prices back to pre-recession levels.

 

Pending Sales Retreat

Index level drops to its lowest level in almost a year.

 

Single-Family Construction Up in November

Though total private residential construction spending slipped to an annual rate of $462.9 billion.