Aug 18, 2014 | Market Outlook
Last week’s economic news brought little housing-related content, but several economic reports in other sectors contributed to overall perceptions of the economy.
In a speech given in Sweden, Fed Vice President Stanley Fischer noted that the economy might be in a period of “secular stagnation.” This condition is expected to keep interest rates low for longer than expected.
A survey of small business owners showed that confidence increased by 0.70 in July. Job openings for June increased from 4.60 million to 4.70 million. Readings for several reports fell shy of expectations and new jobless claims were higher than expected.
Economic Readings Lower Than Expected, Weekly Jobless Claims Rise
Retail sales for July were flat and fell shy of June’s reading of 0.20 percent, which was also the expected reading for July. Retail sales except autos were also lower in July with a reading of 0.10 percent against the expected reading and June’s reading of 0.40 percent.
Weekly jobless claims were reported at 311,000 against expectations of 300,000 new claims and the prior week’s reading of 290,000 new jobless claims. According to the U.S. Department of Commerce, this was the highest reading since June.
New jobless claims were close to pre-recession levels which suggested a slower pace of layoffs. The four-week average of new jobless claims, which presents a less volatile reading than for weekly reports, rose by 2000 new jobless claims to a reading of 285,750.
Mortgage Rates Lower
Freddie Mac’s weekly survey reported lower mortgage rates last week. Average rates were as follows: 30-year fixed rate mortgages had a rate of 4.12 percent and were two basis points lower than the previous week.
Discount points averaged 0.60 percent against the prior week’s reading of 0.70 percent. The average rate for a 15-year fixed rate mortgage was 3.24 percent as compared to the prior week’s reading of 3.27 percent. Discount points were unchanged at 0.60 percent.
The average rate for a 5/1 adjustable rate mortgage dropped by one basis point to 2.97 percent with discount points unchanged at 0.50 percent.
A couple of good news bytes from last week included an increase in small business sentiment in July. The National Federation of Independent Business Index for July increased from June’s reading of 95.00 points to 95.70 points.
The federal government also reported that job openings increased from 4.60 million in May to 4.70 million in June.
What’s Ahead
Several housing-related reports are set for release this week. The National Association of Home Builders (NAHB) will release its Home Builder Index for August, which measures builder confidence in market conditions for newly built homes.
The Department of Commerce will release Housing Starts for July, and the National Association of REALTORS® will release its Existing Home Sales report for July. The Federal Open Market Committee (FOMC) of the Federal Reserve will release the minutes of its most recent meeting on Wednesday; this could provide details concerning the Fed’s recent monetary policy decisions, which include the wind-down of asset purchases under the current quantitative easing program.
Aug 11, 2014 | Market Outlook
Last week’s housing related news was minimal, but a Federal Reserve survey of senior loan officers revealed that although credit standards for commercial and industrial loans as well as credit cards are easing, current mortgage credit standards are more stringent than in 2005. This could be a contributing factor to slowing housing market gains while other sectors of the economy are recovering at a faster pace.
Qualified Mortgage Rules Impact Non-Conforming Mortgages
The Senior Loan Officers survey also noted that qualified mortgage rules have slowed approval of prime jumbo mortgages and non-traditional home loans. This suggests that applicants falling outside of stringent qualified mortgage rules can expect challenges when buying or refinancing their homes.
In other housing news, Freddie Mac’s Primary Mortgage Market Survey reported that last week’s mortgage rates were mixed. Mortgage rates for a 30-year fixed rate mortgage averaged 4.14 percent with discount points of 0.70 percent against last week’s reading of 4.12 percent with discount points of 0.60 percent. 15-year mortgage rates averaged 3.27 percent with discount points of 0.60 percent. This was an increase of four basis points, although discount points fell from 0.70 percent to 0.60 percent. The average rate for a 5/1 adjustable rate mortgage was 2.98 percent, a drop of two basis points, with discount points unchanged at 0.50 percent.
Fewer Jobless Claims, Service-Related Business Growth Exceeds Expectations
The weekly Jobless Claims report brought a lower than expected reading of 289,000 new claims as compared to predictions of 305,000 new jobless claims. In other economic news, the Institute for Service Management (ISM) reported that its non-manufacturing index rose from June’s reading of 56.00 percent to 58.70 percent in July. Analysts had forecasted July’s reading at 56.50 percent. July’s reading represented the highest growth rate for service-related businesses since 2005.
According to the Department of Commerce, June factory orders rose by 1.10 percent over May’s reading of -0.60 percent against an expected reading of 0.60 percent. As business expands and factory orders increase, it’s likely that jobs and hiring will also grow. Steady employment is a compelling factor for most home buyers and positive reports in labor and industrial sectors could boost housing markets as more buyers increase demand for homes.
What’s Ahead
Next week’s economic reports include retail sales, retail sales excluding automotive, industrial production and the weekly reports on mortgage rates and new jobless claims. While there isn’t much housing news expected next week, readings in other economic sectors can suggest potential trends in housing markets
Aug 4, 2014 | Market Outlook
Last week’s economic news included a number of housing related reports. According to the National Association of REALTORS®, pending home sales dropped by 1.10 percent in June. The S&P Case-Shiller Home Price Index reports for May noted that home prices are growing at a slower rate of 9.30 percent year-over-year than April’s year-over-year growth rate of 10.80 percent. Construction spending was also lower in June.
The Fed’s FOMC statement indicated that asset purchases connected to quantitative easing will cease in October, but that the current target federal funds rate is expected to stay in place “a considerable period” after asset purchases conclude. FOMC noted its concern over housing markets, which was based on slower home price growth and market activity.
Pending Home Sales, Home Price Growth Slower
Pending home sales dropped by 1.10 percent nationwide in June. This was the first decrease in four months. Pending home sales rose by 1.10 percent in the Midwest and 0.20 percent in the West, but dropped by 2.90 percent in the Northeast and 2.40 percent in the South. Pending sales are measured by signed purchase contracts and provide an indicator of future completed sales and mortgage loan activity.
The 20-city Case-Shiller Home Price Index for May fell by 1.50 percent to a year-over-year reading of 9.30 percent from April’s 10.80 percent. No cities in the 20-city index reported declining home prices.
Construction spending fell by 1.80 percent in June against projections of an 0.30 percent increase in spending and May’s reading of an 0.80 percent increase. Reasons cited for lower construction spending included builder focus on high-demand areas. Builders have also indicated concerns about rising mortgage rates and tight loan requirements that impact numbers of home buyers that can qualify for home loans.
Mortgage Rates Little Changed, Fed Continues Wind-Down of Asset Purchases
According to Freddie Mac’s weekly Primary Mortgage Market Survey, rates were little changed last week. The average rate for a 30-year fixed rate mortgage was 4.12 percent as compared to 4.13 percent the prior week. Discount points were unchanged at an average of 0.60 percent. The average rate for a 15-year fixed rate mortgage fell by three basis points to 3.23 percent with discount points higher by 10 basis points at 0.70 percent. The average rate for a 5/1 adjustable rate mortgage fell by one basis point to 2.38 percent with average discount points of 0.40 percent unchanged.
The Federal Open Market Committee (FOMC) of the Federal Reserve issued its customary post-meeting statement on Wednesday. The FOMC plans to continue reducing asset purchase under the current quantitative easing program until the purchases cease in October. Although some analysts were concerned that the Fed may consider raising its target federal funds rate based on lower than expected unemployment figures, the FOMC said it doesn’t plan to raise the target federal funds “for a considerable time” after the QE purchases cease, but no specific timeline was given.
Labor Sector News
The Department of Commerce’s Bureau of Labor Statistics posted a national unemployment rate of 6.20 percent for July, which was higher than expectations of a 6.00 percent national unemployment rate and June’s reading of 6.10 percent. To put these readings in perspective, the Fed had established an unemployment rate of 6.50 percent as a benchmark for winding down its asset purchases and potentially raising the target federal funds rate.
Non-farm payrolls reported 209,000 jobs added in July against projections of 235,000 jobs added and June’s reading of 298,000 jobs added. While July’s reading was lower, analysts said that job growth suggests ongoing recovery for labor markets. Labor markets have been cited in recent months as reasons for slower demand for homes and home builder skepticism.
Next week’s scheduled economic news contains no housing-related reports other than Freddie Mac’s mortgage rates report.
Jul 28, 2014 | Market Outlook
Last week’s economic news brought several housing-related reports, which indicated varying results in terms of gauging the economic recovery. FHFA reported slower growth of home prices associated with Fannie Mae and Freddie Mac mortgages, but sales of existing homes as reported by the National Association of REALTORS® surpassed expectations and May’s reading. Sales of new homes slumped to their lowest level in three months. Weekly jobless claims were lower than expected and also lower than for the prior week.
FHFA Home Prices Grow at Slower Rate, Existing Home Sales Higher than Expected
The Federal Housing Finance Agency (FHFA) reported that the average sale price of homes associated with mortgages owned or backed by Fannie Mae and Freddie Mac grew by.40 percent in May with year-over year growth of 5.90 percent. While national home price readings continue to rise, they are doing so at a slower pace since 2013’s rapid appreciation of average home prices.
Sales of previously owned homes reached their highest level in eight months in June. Existing home sales surpassed expectations and May’s reading in June, with sales of pre-owned homes at a seasonally adjusted annual rate of 5.04 million units. Analysts forecasted sales of existing homes at 5.00 million against May’s reading of 4.91 million existing homes sold.
New Home Sales Fall Short in June
New home sales did not achieve the expected volume for June. The reading of 406,000 new homes sold was less than the expected reading of 475,000 new homes sold. Projections were based on the original May reading of 504,000 new homes sold, but this was downwardly revised to 442,000 new homes sold in May. Builders were said to be cautious about over-extending themselves are focused on new home construction in high-demand areas where home prices are higher. Homes are less affordable in such areas, which impacts lower sales volume.
Freddie Mac: Mortgage Rates Steady for 30-year FRM
The average rate for a 30-year fixed rate mortgage was unchanged at 4.13 percent with average discount points also unchanged at 0.60 percent according to Freddie Mac’s weekly survey of mortgage rates. The average rate for a 15-year fixed rate mortgage rose by three basis points to 3.26 percent with discount points higher at 0.60 percent. The average rate for a 5/1 adjustable rate mortgage was two basis points higher at 2.99 percent with discount points ten basis points higher at 0.50 percent.
Weekly Jobless Claims Lowest since 2006
A major consideration for home buyers is stable employment. Recent reports suggest that the labor market is expanding; the Weekly Jobless Claims report continued this trend with a lower than expected reading of 284,000 new jobless claims filed against expectations of 310,000 new claims and the prior week’s reading of 303,000 new jobless claims. Analysts found the declining number of new jobless claims consistent with lower unemployment rates, but cautioned that sustained weekly jobless claims readings lower than 300,000 are more consistent with a national unemployment rate of 5.00 percent or less.
What’s Ahead
This week’s scheduled economic news will add further insight to housing market trends with the release of Pending Home Sales for June and the Case-Shiller Home Price Index report for May. The Bureau of Labor Statistics will also release July’s Non-Farm Payrolls report and National Unemployment report. The Federal Reserve is set to release its customary statement in the aftermath of the Federal Open Market Committee (FOMC) meeting that concludes on Wednesday.
Jul 21, 2014 | Market Outlook
Last week’s economic news offered a variety of indications that the economic recovery continues, but some readings missed their expected levels. The Philadelphia and New York branches of the Federal Reserve Bank reported higher than anticipated manufacturing for their respective regions and new jobless claims were lower than expected.
Fed Chair’s Senate Testimony Hints at Coming Interest Rate Hike
Federal Reserve Chair Janet Yellen testified that the Fed might have to raise interest rates sooner than expected if the economy continues to outperform the Fed’s projections. Ms. Yellen said that the central bank presently estimates that the first rate increases will take place approximately one year from now.
The Federal Open Market Committee (FOMC) of the Fed has repeatedly stated that members will continue to review data and economic conditions changing monetary policy. Ms. Yellen said in last week’s remarks that this holds true whether economic conditions improve or decline.
In other Fed-related news, the Philadelphia Fed released its manufacturing index for July with higher than expected results. The Philly Fed’s reading for July was 23.90 as compared to expectations of 16.50 and June’s reading of 17.80.
The New York Fed reported a similar trend for July with a reading of 25.60 as compared to an estimated reading of 17.50 and June’s reading of 19.30. This is good news after the Northeast’s economy was slammed by severe weather last winter. Weather conditions stalled area housing and labor markets.
Weekly jobless claims were lower at 303,000 than expectations of 310,000 new jobless claims and the prior week’s reading of 305,000 new jobless claims.
Home Builders Post Positive Confidence Reading for July
The National Association of Home Builders posted its highest builder confidence reading in six months for July with a reading of 53 against the expected reading of 50 and June’s reading of 49. Numbers above 50 indicate that more builders surveyed have a positive outlook than not.
Housing Starts for June were reported lower than expected at an annual level of 893,000 against an expected reading of 1.02 million and May’s reading of 985,000 housing starts.
Mortgage Rates Lower
According to Freddie Mac’s weekly survey, average mortgage rates were slightly lower last week. The average rate for a 30-year fixed rate mortgage fell by two basis points to 4.13 percent. Discount points were 0.60 as compared to the prior week’s reading of 0.70 percent. The average rate for a 15-year fixed rate mortgage was 3.23 percent as compared to the previous reading of 3.24 percent.
Discount points for a 15-year mortgage averaged 0.50 percent against the prior week’s reading of 0.50 percent. The average rate for a 5/1 adjustable rate mortgage dropped by two basis points to 2.87 percent with discount points unchanged at 0.40 percent.
The University of Michigan’s Consumer Sentiment Index for July fell just short of expectations at 81.3. Analysts expected a reading of 83.0, based on June’s reading of 82.50. Analysts said that although labor markets are improving, consumers continue to face rising costs for gasoline and food, which likely explained the dip in confidence for July.
What’s Ahead
This week’s economic news releases include Existing Home sales from the National Association of REALTORS®, New Home Sales from the Department of Commerce and the FHFA House Price Index. The Chicago Fed is set to release its National Activity Index. Freddie Mac mortgage rates and New Jobless Claims will be released Thursday as usual.
Jul 14, 2014 | Market Outlook
Last week brought news from the Fed as two Federal Reserve Bank Presidents made speeches and the Federal Open Market Committee (FOMC) of the Fed released the minutes of its last meeting. The minutes reveal the Fed’s intention to wrap up its bond-buying program in October with a final purchase of $15 billion in mortgage-backed securities (MBS) and Treasury bonds. No economic news was issued Monday following of the 4th of July holiday.
Further indications of a strengthening labor market were seen. May job openings reached their highest level since June 2007, and quits and layoffs fell from April’s reading of 4.55 million to 4.50 million. Weekly jobless claims fell to 304,000 against expectations of 320,000 new jobless claims and the prior week’s reading of 315,000 new jobless claims.
Fed Speeches Address Inflation, Banks Too Big to Fail
Tuesday’s speech by Minneapolis Fed Bank president Narayana Kocherlakota calmed concerns over inflation; Mr. Kocherlakota said that the Fed expects inflation to remain below its target rate of two percent for several more years. He tied low inflation to the unemployment rate and said that the nation’s workforce is not fully utilized in times of low inflation, and cautioned that June’s national unemployment rate of 6.10 percent “could well overstate the degree of improvement of the U.S. labor market.”
Stanley Fischer, the Fed’s new vice-chairman, spoke before the National Bureau of Economic Research last Thursday. Mr. Fischer addressed the issue of breaking up the nation’s largest banks to eliminate the government’s exposure to banks too big to fail. He said that it wasn’t clear that breaking up the largest banks would end federal bailouts of banks considered too big to fail. Mr. Fisher also said that breaking up the biggest banks would be “a complex task with an uncertain payoff.”
Mr. Fischer also said that any efforts to prevent a housing bubble should focus on the supply side and cautioned that “measures aimed at reducing the demand for housing are likely to be politically sensitive.”
FOMC Minutes Reveal End Date for Bond Purchases
The minutes of the Fed’s last FOMC meeting indicate that the Fed plans to continue bond purchases at the rate of $10 billion per month with a final purchase of $15 billion in October. FOMC members re-asserted their oft-stated position that the Fed’s target interest rate of 0.00 to 0.25 percent will not change for a considerable time after the bond purchase program ends.
Mortgage Rates Rise
Average mortgage rates rose across the board last week. The average rate for a 30-year fixed rate mortgage increased by three basis points to 4.15 percent; discount points were also higher at 0.70 percent. The average rate for a 15-year fixed rate mortgage rose by two basis points to 3.24 percent with discount points higher at 0.60 percent. The average rate for a 5/1 adjustable rate mortgage rose by one basis point to 2.99 percent with discount points unchanged at 0.40 percent.
What’s Ahead
This week’s scheduled economic news includes retail sales and retail sales without the auto sector, Fed Chair Janet Yellen’s testimony, the Fed’s Beige Book report and the NAHB Homebuilder’s Market Index. Housing Starts, Consumer Sentiment and Leading Economic Indicators round out the week’s economic reports.
