September 2015 - Equity Source Mortgage

Labor Market, Manufacturing Index

September 30, 2015

Wednesday – September 30

The labor market continues to improve with robust job hiring in the private sector reported in September. ADP reported that private employers added 200,000 new workers this month, which was in line with expectations. The ADP report is based on data from businesses with almost 24 million workers on their combined payrolls. The improving job market will be a key factor in the Federal Reserve’s decision on whether or not to raise interest at its Federal Open Market Committee meeting at the end of October.

A key regional manufacturing index signaled that activity was contracting this month, falling to a four month low. The Chicago Manufacturing Index fell to 48.7 from a reading of 54.4 in August and below the 52.9 expected. The lower than expected reading put a damper on optimism regarding the U.S. economic outlook. A reading above 50 indicates expansion, below indicates contraction.

A key bill in Washington to temporarily fund the government until December 11, passed through the Senate today and will now head to the House, where it is also expected to pass. The passage of the bill would avert a shutdown of the government and will provide lawmakers some time to negotiate a budget that will fund the government through and up to September 2016.

September 29, 2015

Tuesday – September 29

Home prices continued to rise in July due to the ongoing strength in the U.S. economy. The Case Shiller 20-city Index showed a 5% gain year-over-year, which was in line with expectations. The index has risen at a 4% or higher rate since September 2012. From June to July, prices rose 0.6%. “Prices of existing homes and housing overall are seeing strong growth and contributing to recent solid growth for the economy,” said spokesperson David Blitzer.

Consumers across the U.S. felt a bit more optimistic about the economy in September. The Conference Board reported that its Consumer Confidence Index rose to 103.0 in September, well above the 96.0 expected and up from 101.5 in August. Consumer appraisals of current conditions were more positive in September. Labor market conditions were mixed as those feeling that jobs are plentiful increased, while the feeling that “jobs are hard to get” also increased.

Analytics firm CoreLogic reported on Tuesday that cash sales made up 31% of total home sales in June, down from 34% in June 2014. The year-over-year decrease has taken place each month since January 2013. Back in January 2011, cash sales peaked at nearly 47% of total sales across the nation, while before the housing crisis in late 2007, cash sales were 25%.

September 28, 2015

Monday – September 28

Inflation remained tame at the consumer level as evidenced by the Core Personal Consumption Expenditure (PCE). The Core PCE rose by 0.1% in August from July, due in part to falling gas prices. Meanwhile, year-over-year Core PCE grew by 1.3%, which is well below the Federal Reserve’s target level of 2%. Low inflation levels could keep the Federal Reserve from raising interest rates this year and they could hold off a hike until next year.

Americans opened their wallets in August on goods ranging from back-to-school items to new autos, signaling the U.S. economy continues to grow. The Commerce Department reported Monday that Personal Spending rose 0.4% last month, above the 0.3% expected. In addition, Personal Incomes rose 0.3%, just below the 0.4% anticipated and have been steadily rising since April. Since spending outpaced incomes, the personal savings rate ticked down to 4.6% from 4.7%.

Over in the housing markets, Pending Home Sales in August unexpectedly declined by 1.4% as rising home prices keep buyers on the fence. The National Association of REALTORS® (NAR) said that despite the weak reading, sales are still up 6.1% from a year ago. The biggest decline was seen in the Northeast falling by 5.6%, the Midwest saw a 0.4% decrease, the South saw sales fall 2.2%, while the West registered a 1.8% gain. Pending Home Sales measures housing contract activity. It is based on signed real estate contracts for existing single-family homes, condos and co-ops. A signed contract is not counted as a sale until the transaction closes.

September 25, 2015

Friday – September 25

The Bureau of Economic Analysis reported Friday that the final reading for second quarter U.S. growth surged, led by higher consumer and business spending. Second quarter Gross Domestic Product rose by 3.9%, above the 3.7% expected and up from the 3.7% read from the second estimate. The 3.9% was well above the anemic 0.6% registered in the 1st quarter. Within the report it said that consumer spending grew at a 3.6% pace, up from 3.1% that was previously estimated. GDP measures the value of goods and services produced in the nation.

On Thursday evening Fed Chair Yellen was speaking on the economy in Massachusetts and she lifted some of the uncertainty surrounding the timing of interest rate hikes. Ms. Yellen said that the benchmark short term Fed Funds rate will most likely rise by the end of the year, though the decision will still depend upon incoming economic data in the next few months. Ms. Yellen said the U.S. economy is strong enough to support an increase in the benchmark Fed Funds Rate.

Global growth concerns pushed consumers assessment of the current state of affairs in the U.S. to lows not seen since October 2014. The Consumer Sentiment Index fell to 87.2 in September, below the 91.9 in August, though above the 84.6 from a year ago. “Consumers now believe that that global economic trends can directly influence their own job and wage prospects,” said Richard Curtin, chief economist for the survey.

September 24, 2015

Thursday – September 24

The Commerce Department reported Thursday that single-family home sales surged in August, while July’s numbers were also revised higher, signaling continued strength in the U.S. housing market. New Home Sales in August rose 5.7% from July to the highest rate since 2008 and are up nearly 22% since August 2014. Expectations were calling for 515,000 units in August. In addition, July’s numbers were revised to 522,000 from 507,000. The New Home Sales report shows the number of newly constructed homes with a committed sale during the month.

Dow component and heavy equipment maker Caterpillar reported Thursday that it will be cutting up to 5,000 jobs by the end of 2016 for cost cutting measures due to tough conditions in the energy sector. The company went on to say that layoffs could total 10,000 through 2018, while revenues could decline in 2016 for a record fourth straight year. In addition, Caterpillar will also offer a voluntary retirement enhancement program this year for qualifying workers.

RealtyTrac released its August 2015 Home Sales Report on Thursday revealing that single-family home and condo sales through August were on pace for an eight-year high nationwide and in 110 out of 204 (54%) metropolitan statistical areas with sufficient sales data. A total of near 2 million single-family homes and condos sold through August in 2015, up 5.4% from the beginning of the year, to the highest total for the first eight months of the year since 2007.

September 23, 2015

Wednesday – September 23

A recent study showed that the number of homes losing value monthly tripled in the past year. The report went on to say that a majority of the homes are still gaining value, however, the national trend is lower. Weiss Residential Research CEO Allan Weiss said, “In this environment buyers and investors should be careful to avoid buying properties that are losing value by reviewing metro and zip code maps on Owners.com that show hyper-local trends in changing value.”

Mortgage application volume rose in the latest week as rates continue to hover just above historical lows. The Mortgage Bankers Association (MBA) attributed the rise to significant rate volatility last week surrounding the Federal Open Market Committee meeting as rates edged lower. The MBA’s Market Composite Index, a measure of total loan application volume, rose nearly 14%, while the refinance index surged nearly 18% and the purchase index saw a 9% increase.

The recent problems at Volkswagen surrounding the German car company’s attempt to cheat on federal emission standards has cast a dark cloud over the entire car making industry across the globe. The National Highway Traffic Safety Administration now says it will question everything when it comes to self-certified testing at auto makers. As the lawsuits mount up at Volkswagen, most of the major companies have also endured harsh penalties. General Motors agreed to a $900 million settlement over faulty ignition switches linked to over 100 deaths, Fiat Chrysler coughed up $105 million for failing to live up to safety regulations, while Toyota paid a $1.2 billion fine to settle a criminal investigation.

September 22, 2015

Tuesday – September 22

Housing news continues to stream in with mixed results as the sector deals with tightening inventories and rising prices. The Federal Housing Finance Agency reported on Tuesday that home prices were up 0.6% in July from June. In the year ended in July, prices were up nearly 6%. The survey is based on home sales price information from mortgages sold to, or guaranteed by, Fannie Mae and Freddie Mac. The data comes after lower than expected results from Existing and New Home Sales in the past week. The index is 1.1% below its March 2007 peak and is roughly the same as the November 2006 index level.

A recent Harvard University study revealed that renters will continue to struggle for the next decade as an estimated 11% more households will fork over at least half of their incomes in rent in 2025. The study said that renters who pay more than half of their earnings in rent often need federal subsidies to find affordable places to live. One big factor for the recent uptick in renting was that many lost their homes during the Great Recession along with incomes declining. The report went on to say that if rents continue to grow faster than incomes, the number of households in hardship could rise as much as 25%.

U.S. Stock markets continue their roller coaster ride due to uncertainty surrounding the Federal Reserve’s future interest rate hikes. Last week, the Federal Reserve held off from raising its benchmark Fed Funds Rate, which is currently at 0.00% – 0.25%. Markets hate uncertainty, and today’s action sees the Dow Jones Industrial Average down well over 200 points. Yesterday, Atlanta Fed President Dennis Lockhart fueled the uncertainty flames when he said a rate hike later this year was still possible and that the Fed, in recent months, has added to the market instability and needs to refine its communication approach.

September 21, 2015

Monday – September 21

The National Association of REALTORS® reported on Monday that August Existing Home sales declined 4.8% from July to an annual rate of 5.31 million, below the 5.50 million expected. The drop comes after three straight monthly gains. Despite the decline in August, sales have risen year-over-year for 11 consecutive months and are 6.2% above a year ago. Lawrence Yun, NAR chief economist said, “Sales activity was down in many parts of the country last month, especially in the South and West as the persistent summer theme of tight inventory levels likely deterred some buyers.” Existing Home Sales are completed transactions that include single-family, townhomes, condominiums and co-ops.

In a sign that the holiday shopping season is just around the corner, department store chain Macy’s announced that the company will be hiring 85,000 temporary workers for 2015 holiday season. The number is slightly lower from last year’s 85,000 though this year Macy’s will assign more of the workers to its online e-commerce support team. Walmart and Target will hire the same amount of temporary workers as last year, 60,000 and 70,000 respectively. ShopperTrak is forecasting that holiday sales will rise 2.4% from last year.

Gas prices continue to edge lower at the pumps as the summer driving season has come to an end and demand eases. The national average price for a regular gallon of gas is $2.28, down from the $2.63 from a month ago and well below year-ago levels of $3.34. In parts of New Jersey, the price can be seen at $1.81, while GasBuddy said that it believes that the national average price could fall below $2 sooner than expected. Motorists are currently saving $15-$25 on a full tank of gas compared to this time last year.

September 18, 2015

Friday – September 18

Fannie Mae released its third quarter 2015 Mortgage Lender Sentiment Survey revealing that lenders say it’s now easier to obtain a mortgage as credit standards are beginning to ease. A Fannie Mae spokesperson cited that lenders are growing more comfortable with certain guidelines along with becoming more acquainted with the new rules and regulations. Doug Duncan, senior vice president and chief economist at Fannie Mae says, “Overall, we expect that lenders’ tendency toward easing credit standards, together with relatively low mortgage rates and a strengthening labor market, will continue to support the housing market expansion.”

Fannie Mae also released its September Economic and Housing Outlook this week reporting that continued positive consumer spending and other solid domestic fundamentals are expected to offset recent market volatility and support modest improvement in U.S. economic growth in the second half of the year. Consumer spending has picked up in July and August as job growth continues, while wage growth has begun to rise. Fannie Mae sees total mortgage originations to increase 25% for all of 2015, though it sees refinancing activity to decrease modestly.

The Federal Reserve left its benchmark short term Fed Funds Rate unchanged (0.00% – 0.25%) at its Federal Open Market Committee meeting yesterday on Capitol Hill in Washington D.C. The central bank raised concerns of slowing global growth along with low inflation levels. The Federal Funds Rate is the rate in which financial institutions lend balances to one another on an overnight basis. The rate has been stuck at zero to 0.25% since December 2008 and has not been raised since June of 2006. The Federal Reserve embarked on bolstering the economy, jobs market and housing sector, by lowering interest rates.

September 17, 2015

Thursday – September 17

The Commerce Department reported on Thursday that Housing Starts fell 3% in August from July to an annual pace of 1.126 million units, below the 1.158 million expected. Within the report it showed that multifamily units fell 3% in August after the 23% decline in July. This comes after multifamily starts were up nearly 40% in June and April. Housing Starts are up 7.5% since August 2014 and remain above a one-million pace for the fifth straight month, signaling that the sector has recovered a big portion of the losses sustained when the housing bubble imploded back in 2008. In addition, Building Permits, a sign of future construction, rose 3.5% to an annual rate of 1.170 million units, above the 1.158 million expected.

The price of renting in the U.S. rose in August for the 58th straight month and are up 3.6% so far this year. Rent prices have been on the rise due to a smaller amount of units available along with an increase in demand. The average rental is lowest in Arkansas at $760, to a high of $2,640 in New York. Just recently, the Census Department reported that home ownership rates fell to 63.4%, a 48-year low.

The Philadelphia Federal Reserve released its monthly manufacturing index showing negative readings on its top line index. The Philly Fed Index fell to negative 6.0 in September after a positive 8.3 reading in August and well below the +6.5 expected. It was the first negative reading since February 2014. Within the report it did show that the employment component rose 5 points to its highest level in five months while new orders showed growth.

Blog

Labor Market, Manufacturing Index

September 30, 2015

Home Prices, Consumer Confidence, Home Sales

September 29, 2015

Low Inflation, Personal Spending, Pending Home Sales

September 28, 2015

GDP, Fed Funds Rate, Consumer Sentiment

September 25, 2015

US Housing Market, Caterpillar, Single Family Homes

September 24, 2015

Home Values, Mortgage Applications, Volkswagon

September 23, 2015

Housing, Renters and US Stock Market

September 22, 2015

August Existing Home Sales, Retail hiring, Gas Prices

September 21, 2015

Easier to get a mortgage, US economy, Fed Funds Rate

September 18, 2015

Housing Starts down, Price of Renting, Manufacturing Index

September 17, 2015

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