May 27, 2014 | Uncategorized
Last week’s economic news was dominated by speeches given by Federal Reserve presidents, the minutes from April’s FOMC meeting and commencement address given by Fed Chair Janet Yellen. The latest readings for new and existing home sales were also released.
Federal Reserve Speeches Suggest Concerns Over Monetary Policy Dependence, Low Inflation
Here are highlights of comments made by each of the Fed presidents’ speeches. Richard Fisher, president of the Dallas Fed, and John Williams, President of the San Francisco Fed, spoke at a conference held at the Bush Institute.
Mr. Fisher said that 98 percent of jobs lost during the recession had been recovered, and that other jobs had been added. He also cited “bad fiscal policies,” and said he is worried about dependence on the Fed’s monetary policy when “Congress and the Executive Branch have put on the brakes.”
John Williams, president of the San Francisco Fed, said that he was concerned about slowing momentum in housing markets, although he noted that housing had driven economic recovery in the aftermath of the recession.
The inflation rate has remained well below the Federal Reserve’s target rate of 2.00 percent, and Mr. Williams said that the Fed is paying close attention to this. His remarks were supported in Wednesday’s release of the FOMC minutes of its April meeting.
Charles Plosser, the Philadelphia Fed’s president, took an optimistic tone at a speech given before the Women in Housing Foundation on Tuesday. He said that the national unemployment rate could fall below 6.00 percent by the end of 2014 and that he expects the housing market to bounce back as well.
This makes sense, as strong labor markets are known to influence consumer decisions to buy a home.
New York Fed President William Dudley spoke before the New York Association for Business Economics, and said that there would be “a considerable period of time” between when the current asset purchase program ends and the first Fed rate hike would occur.
He also indicated that he expected longer-term interest rates (which include mortgage rates) to be “well below” a historical average of 4.25 percent.
Minneapolis Fed President Narayana Kocherlakota said that the Fed should consider targeting price levels rather than the current policy of targeting the inflation rate. He said that this was not likely to occur any time soon, but noted that current Fed policy is “undershooting” the central bank’s goals for unemployment and inflation.
Fed Chair Janet Yellen cited her predecessor, Ben Bernanke as a positive example when she spoke at New York University’s commencement. She noted that he took “courageous actions unprecedented in ambition and scope” and that his “grit willingness to take a stand” had directed his decisions during the recession.
Mortgage Rates Down, Existing Home Sales Up
Freddie Mac reported that average mortgage rates dropped last week. The average rate for a 30-year fixed rate mortgage fell to 4.14 percent, a drop of six basis points. The rate for a 15-year fixed rate mortgage fell by four basis points to 3.25 percent.
The average rate for a 5/1 adjustable rate mortgage dropped by five basis points to 2.96 percent. Discounts were unchanged at 0.60 percent for 30-year mortgages and 0.40 for 5/1 adjustable rate mortgages, but dropped to 0.50 percent for 15-year mortgages.
Sales of existing homes rose to their highest level in four months according to the NAR. Month-to-month sales of previously-owned homes rose by 1.63 percent in April to a seasonally adjusted annual rate of 4.65 million sales as compared to March’s reading of 4.59 million sales. This was the first rise in sales of existing homes in 2014, and nearly met expectations of 4.66 million sales.
This Week
After the Memorial Day holiday, this week’s economic news includes the Case-Shiller Home Price Index, FHFA’s house price index and consumer confidence index.
Pending home sales, jobless claims and Freddie Mac’s mortgage rates report along with the University of Michigan consumer sentiment index round out the week’s scheduled events.
Jan 24, 2013 | Housing Analysis
Home sales dropped last month, but not because demand was lacking. There are fewer homes for sale than at any time in the last 11 years.
According to the National Association of REALTORS®, Existing Home Sales for December 2012 fell to a seasonally-adjusted, annualized rate of 4.94 million homes from November’s tally of 4.99 million existing homes.
The Existing Home Sales report is based on the number of closings for previously-owned, single-family homes, townhomes, condominiums and co-ops. It’s estimated that existing homes account for 85 to 90 percent of all home sales nationwide.
2012 was a good year for housing. Sales of existing homes climbed 12.8 percent as compared to the December 2011 tally, which may be a strong indicator of future mortgage originations and short-term demand for home-related goods.
Based on preliminary sales figures, the number of home resales in 2012 grew 9.2 percent to 4.65 million homes as compared to 4.26 million homes sold during 2011. This marks the highest number of home resales sold in 5 years — a time which predates the recession of last decade.
In addition, the median price of a homes resale read $180,800 in December, which is a 11.5 percent increase as compared to December 2011, and the tenth consecutive month of year-over-year median price growth.
Not since November 2005 has the median home resale price climbed this quickly
Furthermore, the supply of existing homes fell to 4.4 months in December, down 0.4 months from November. At the current pace of sales, the national home resale inventory will be sold by June. This is an important statistic because home supply of less than 6.0-months is thought to represent a “seller’s market”.
There are also just 1.82 million existing homes for sale nationwide — the fewest since January 2001, and a 22 percent reduction from one year ago. With buyer demand high and home inventory down, home prices are likely to rise in Worcester County area and nationwide throughout 2013.
Jan 4, 2013 | Housing Analysis
Home buyers continue to push the U.S. housing market forward.
In November, for the second straight month, the Pending Home Sales Index eclipsed its benchmark reading of 100, posting a value of 106.4.
The Pending Home Sales Index (PHSI) is published monthly by the National Association of REALTORS®. It tracks homes under contract to sell, but not sold. The PHSI is relative index, comparing current contract activity to the activity of 2001 — the first year for which “pending homes” were tallied for an index.
The Pending Home Sales Index has posted an average score of 100.2 from January 2012 through November 2012, the most recent month for which there’s data. This is a significant data point because it means that the 2012 housing market is performing better than the 2001 housing market; one which is widely considered a strong one for housing.
It’s also meaningful because it foreshadows a strong market for 2013. With an increasing number of homes under contract to sell, it can be assumed that “closed units” will increase in the future, too.
The National Association of REALTORS® says that 80% of U.S. homes under contract go to closing within 60 days, and that many of the remaining homes go to closing within days 61-120.
The monthly Pending Home Sales Index, therefore, can foreshadow to today’s buyers and sellers what’s ahead for the housing market.
The Pending Home Sales Index is a forward-looking indicator.
Based on November Pending Home Sales Index, we should expect to the home resale market to remain strong, and to pick up strength, through the first quarter of 2013. Demand for homes is high, mortgage rates are low, and buyers are looking to get a good deal.
The first few months of the year are often thought to be “slow” for the housing market. This year, however, that may not be the situation. If you’re actively looking for homes in Massachusetts , the best prices may be the ones you get this winter.
Dec 24, 2012 | Mortgage Rates
Mortgage markets worsened last week amid ongoing discussions budget and tax conversations in Washington, D.C., and the release of key housing and economic data.
Mortgage rates climbed in Massachusetts and nationwide.
Freddie Mac reported the average 30-year fixed rate mortgage rate at 3.37 percent nationwide for borrowers willing to pay an accompanying 0.7 discount points at closing, plus closing costs — an increase of 0.05 percentage points from the week prior.
The average 15-year fixed rate mortgage rate was listed at 2.65 percent nationwide with an accompanying 0.7 discount points plus a full set of closing costs.
With certain government funding and tax reductions set to expire December 31, legislators appear unlikely to avoid what’s been called the “Fiscal Cliff”. Some economists believe that reaching January 1 with no agreement in place will set the economy in to recession.
Mortgage rates tend to improve on “negative” news for the economy, which partially explains why mortgage rates made a small comeback late in the week.
In other news, according the National Association of REALTORS®, Existing Home Sales reached their highest point since November 2009, climbing to 5.04 million homes sold on a seasonally-adjusted, annualized basis. In addition, the real estate trade group reports that the Existing Home Supply has dropped to 4.8 months — a figure firmly suggesting a “seller’s market”.
Separately, the Commerce Department reported single-family housing starts rising, too; down 4.1 percent in November but up nearly 23 percent as compared to November 2011.
This week, Fiscal Cliff discussions are likely to dominate mortgage markets. The trading week will be holiday-shortened and volume will be lighter-than-normal. This may lead to volatile pricing and rapid interest rate movements.
Markets close early Monday and remain closed through Tuesday. Wednesday, markets re-open with no new data set for release. Then, Thursday, scheduled economic news events resume Thursday with New Home Sales, Jobless Claims and Consumer Confidence due.
Friday, the Pending Home Sales Index is released.
Nov 23, 2012 | Housing Analysis
According to a joint release from the U.S. Census Bureau and the Department of Housing and Urban Development, Housing Starts rose 3.6% in October 2012, climbing to a seasonally-adjusted, annualized rate of 894,000 units.
A “housing start” is a new home on which construction has started and the report gives buyers and sellers across Worcester County area yet one more reason to be optimistic for the 2013 housing market.
Regionally, Housing Starts varied.
The West and Midwest Regions posted gains between September and October 2012; and, the South and Northeast Regions posted declines. The latter was affected by the effects of Hurricane Sandy.
- West Region : +17.2% from the month prior
- Midwest Region : +8.9% from the month prior
- South Region : -2.5% from the month prior
- Northeast Region : -6.5% from the month prior
Single-family housing starts — starts for homes not considered multi-unit properties or to be apartment buildings — was mostly unchanged, slipping 1,000 units on a seasonally-adjusted annualized basis.
The Housing Starts data is the third housing-related release this week that hints at a strong start for the 2013 housing market.
Early in the week, the National Association of Homebuilders released its Housing Market Index (HMI), a measure of home builder confidence in the new construction market. The HMI posted 46 — the highest reading since 2006. With mortgage rates low and buyer traffic high, builders are expecting a rash of sales between now and the New Year, and an elevated number of closing over the next six months, in general.
The HMI is scored on a scale of 1-100. One year ago, it read 19.
Then, the National Association of REALTORS® showed Existing Home Sales climbing 2.1% and home supply fell to a multi-year low. At the current sales pace, the entire U.S. home inventory would be sold in just 5.4 months. Analysts believe that a home supply of less than 6.0 months favors home sellers.
In unison, these three housing market reports suggest a sustained, national housing market recovery. Home prices are expected to rise into next year’s housing market.
