Markets will be paying attention to the FOMC rate decision today at 2 pm ET.  Although a rate hike of 25 basis points, to a range of 2.00%-2.25% on the fed funds rate, is wildly expected, the wording of the statement will be closely dissected.  Should the Fed leave out the word “accommodative” in their policy statement, markets would take that as the Fed might be closer to neutral, and the pace of future rate hikes may subside.  Since this is a 2-day meeting, a press conference will follow and there will be a Q&A period.   

New Home Sales    

New home sales in August rose to a seasonally adjusted rate of 629,000, 3.5% better than July’s downwardly revised rate of 608,000 (downward from 627,000).  The median sales price rose 1.9% year- over-year to $320,200.  The supply of new homes at the current pace of sales increased to 6.1 months from 6.0 months a year ago, but down from 6.2 months in July.  The increase in supply is good to see and may help alleviate rising prices.  As we mentioned in yesterday’s Afternoon Note, “Buyers are reaching a point where they don’t want to pay higher prices, and sellers in some states are having to reduce their listing prices.”

Mortgage Applications

Mortgage applications rose for the second week in a row, increasing 2.9% (seasonally adjusted) for the week ending September 21.  The Purchase Index rose 3% despite rising mortgage rates.  The 30-year fixed-rate mortgage rose 9 basis points to 4.97%, the highest since April 2011, from 4.88%.  After two weeks of declining purchase applications in the beginning of August, we have seen five weeks of increases.

On the refinance side, the Refinance Index (unadjusted) increased 3% from the prior week.  Rising rates tends to get fence sitters to jump off the fence as they jump to lock in rates before they rise further.   A strong economy and job market continue to support demand. Low inventory levels and rising rates are challenges that need to be overcome.    

Equity indices are trading with a slightly bullish tone ahead of this afternoon’s Fed rate decision.

Breadth: Neutral

• NYSE advances 1,466 to declines 1,450; new 52-week highs 46 to new lows 85
• Nasdaq advances 1,439 to declines 1,482; new 52-week highs 65 to new lows 57