Kick-Off: All Eyes on the Fed for the First Interest Rate Hike since 2008

Here’s a look at the news, events and reports coming this week that shape the servicing, mortgage and housing industry.

The Big News

All eyes this will be on the Federal Open Market Committee this week for, barring any extraordinary change, will bring the first interest rate hike since 2008.
The rate hike will lift the fed funds rate to 0.375 percent from a range of zero to 0.25 percent.
“The rationale for expecting action next week is pretty straightforward: Two weeks ago, (Federal Reserve Chair Janet) Yellen indicated that the conditions the committee has set for liftoff were close to being met – a statement which was followed shortly after by a strong payroll report further supporting the case for a hike,” J.P. Morgan analysts said in a client note.
The interest rate set by the Fed, the federal funds rate, serves as a benchmark for all other rates. A change in the fed funds rate, the lending rate banks charge each other for the use of overnight funds, translates directly through to all other interest rates from Treasury bonds to mortgage loans.
DS News and The M Report will have up-to-the-minute coverage.

Tuesday

The day before the FOMC meeting, the National Association of Realtors will release their housing market index for December.
The housing market index has been very solid though the November report did come in well under expectations, at 62 for a 3 point loss.
Both future and present sales slowed in November but not traffic which, though still lagging this cycle, has been showing new life thanks to greater interest from first-time buyers.
Analysts predict a 1 point rebound in December to 63.

Wednesday

Besides the FOMC meeting and announcement, Wednesday will also see the Housing Starts report for November from the Census Bureau. Housing starts are expected to rebound 7.6 percent in November to a 1.141 million annualized rate while housing permits are expected fall 0.3 percent to a 1.146 million rate.
Housing starts were a big disappointment in October, falling 11 percent though permits, which are a leading indication for starts, rebounded more than 4 percent. New homes have been leading the housing sector though strength has sometimes been inconsistent.

Thursday

The Commerce Department puts out one of two reports on Thursday that gives a broad look at economic conditions that will carry us into the new year. The Leading Indicators report had been dead flat since July until jumping 0.5 percent in October, in a gain helped by the month's rebound in the stock market and gains for housing permits. But October's jump aside, this index has been pointing to no more than sluggish growth for the economy. Analysts don’t expect a big lift for November.
The second report, the Bloomberg Consumer Comfort Index, gives an idea of how consumers are feeling in general. Consumer spending drives two-thirds of the economy and if the consumer is not confident, the consumer will not be willing to spend.
Taken together, the two give some insight into what the first quarter may bring.