Interest rates ended up moderately after what had looked like a good week. Stronger than expected Housing Starts (+8.2% in April) erased all the gains from earlier in the week.
In other news, the price of single-family homes dropped 7.7% nationwide in the first quarter of ‘08. This was the largest year to year drop since the NAR started compiling statistics in 2002.
The median sales price for a single-family home fell to $196,300, down 4.8% from the last three months of 2007. This data is skewed somewhat by high end homes that are suffering from higher rates for jumbo mortgages (above $417,000).
In contrast to the rest of the country, the Northeast region actually saw a rise in the average sales price (+3.2%).
The coming week features only two important economic releases relating to the housing sector. The Producer Price Index, on Tuesday, will give us a glimpse into the future of inflation. Also, on Friday, Existing Home Sales will be anticipated.
How Does a Weak Dollar Influence Interest Rates?
The US dollar is one of the leading economic commodities in the world. Foreign investors purchase dollars to buy US goods and services, as well as assets such as mortgage and treasury backed securities. When the dollar is strong, its value rises in relation to other major currencies. Prices of foreign goods and services drop for US consumers. While US consumers benefit from this through cheaper foreign goods, it has the reverse effect on American exports, which become more expensive overseas.
Many analysts believe that the Fed is letting the dollar fall to help trade balances by making US goods more affordable around the world. A strong dollar makes it inviting for foreign investors to put their money into mortgage bonds, which keeps rates low.
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Lew Corcoran, ASP®, IAHSP, IAHSP-CB