While mortgage credit conditions in the U.S. remain “generally tight,” and applications for purchase mortgages remain “tepid,” according to the Fed, signs of easing continue to emerge, including indications of “a net easing of banks’ credit standards for home-purchase loans to prime customers in the first quarter.”
The Fed’s summary of the nation’s housing market, the market for which most participants in the Fed’s latest meeting noted a “continuing weakness” in activity:
The pace of activity in the housing sector remained soft, as real expenditures for residential investment decreased again in the first quarter. Starts of new single-family homes increased in March. However, permits for single-family homes–which are typically less sensitive to fluctuations in the weather and a better indicator of the underlying pace of construction–remained below their fourth-quarter level and had not shown a sustained improvement since last spring, when mortgage rates began to rise. Sales of both new and existing homes decreased in March of this year, but pending home sales rose.
Currently averaging around 4.2 percent, Freddie Mac is forecasting that the average rate for 30-year fixed mortgages will end the year at “around 4.6 percent.” The yield on the 10-year treasury ticked up a few basis points after the Fed’s notes were released, a move which should send mortgage rates up a few basis points over the next week.