Mortgage rates reacted to the Fed's comments last week on economic growth in the US, concerns about growth overseas and future inflation expectations. The mortgage rate reaction was favorable and rates have improved a bit over the last few days.
The Fed met and released their statement on September 17th. The press conference that followed the meeting provided investors with the Fed's view that future inflation is expected to be low for several more years. One of the main reasons is the weakness overseas and that is providing downward pressure on inflation in the short term. The forecast from the Fed members is that the US inflation rate will not hit 2.0% until 2018. Since investors base mortgage rates on expectations of future inflation, this helped lower interest rates.
The Fed did note that the housing sector has shown additional improvement. Homebuilders seem to agree with that. The NAHB confidence index rose to the highest level in 8 years. August existing home sales did fall a bit from July, they still remain above last years pace.
The next employment report will be released in October and that may affect interest rates. Many had expected the Fed to raise interest rates and since that did not happen, rates improved after the meeting.
The reality is that interest rates are still very low, home prices have started to climb but if you are looking to buy a home, now is a great time to do that!