Housing, rates, and job growth

January 08, 2020

The housing market in 2020 has been upgraded in forecasts for single-family housing starts, new home sales and mortgage originations. Fannie reports that its Home Purchase Sentiment Index (HPSI) capped off a strong year in December with the index just below the survey high at 91.7. Three of the six HPSI components increased month over month, including the percentage of Americans who believe that home prices will go up over the next 12 months. Annually, the HPSI is up 8.2 points, driven primarily by consumers’ favorable mortgage rate expectations and a growing share reporting it’s a good time to buy a home.

Mortgage rates edged lower in the latest week and remain just above all-time lows. The Mortgage Bankers Association reports that the 30-year fixed-rate mortgage fell by four basis points to 3.91% with 0.33 in points. Mike Fratantoni, MBA Senior Vice President and Chief Economist said, “We expect that the strong job market will continue to support purchase activity this year, and the uptick in housing construction towards the end of last year should provide more inventory for prospective buyers.”

Private job growth surged in December as the labor market continues to be a big source of strength for the U.S. economy. ADP reports that private payrolls rose by 202,000 last month, well above the 155,000 expected. The November number of 67,000 jobs created was revised higher to 124,000. Ahu Yildirmaz, vice president and co-head of the ADP Research Institute said, “The service providers posted the largest gain since April, driven mainly by professional and business services. Job creation was strong across companies of all sizes, led predominantly by midsized companies.”

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Fed Funds Rate is expected to rise | Rising home prices across U.S.

December 11, 2017

The two-day Fed meeting kicks off on Tuesday and ends Wednesday with the 2:00 p.m.ET release of the Fed statement. Fed Chair Yellen will hold a press conference immediately following the release at 2:30 p.m. ET in what will be her last as Fed Chair. The Fed Funds Rate is expected to rise by 0.25% to 1.50%. The statement could reveal more rhetoric on the Fed’s balance sheet and will reveal the current state of the economy. The Fed statement always carries a big headline risk.

Rising home prices across the U.S. lifted many underwater mortgages into positive equity between the second and third quarters of 2017. Analytics firm CoreLogic reports that 260,000 mortgaged properties regained equity between the second and third quarters of 2017. CoreLogic Chief Economist Frank Nothaft said, “Homeowner equity increased by almost $871 billion over the last 12 months, the largest increase in more than three years. This increase is primarily a reflection of rising home prices, which drives up home values, leading to an increase in home equity positions and supporting consumer spending.” Negative equity means your home’s current fair market value is less than your outstanding loan balance (i.e you owe more on your home than it’s worth).

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GDP Strong, Pending home sales increased, Automation will impact jobs by 2030

November 29, 2017

Solid economic growth was seen from the second reading on third quarter Gross Domestic Product (GDP) where strong business inventory and equipment investment offset an ease in consumer spending. The second read on Q3 GDP rose 3.3%, up from 3.0% in the first reading. This was the best number since Q3 2014. GDP registered 1.2% in the first quarter of 2017 and 3.1% in the second quarter. Consumer spending fell to 2.3% in the third quarter after hitting 3.3% in the second quarter. GDP is the monetary value of all the finished goods and services produced within a country’s borders in a specific time period. It is considered the broadest measure of economic activity.

After a weak reading in September due to hurricanes Harvey and Irma, signed contracts to purchase existing homes surged in October. The National Association of REALTORS® reports that Pending Homes Sales increased 3.5% in October from September, the highest level since June. However, sales were down 0.6% from a year earlier. The South saw the biggest gain of 7.4%, which was most likely due to pent-up demand after the storms subsided.

A disturbing report on the state of future labor market activity was released by McKinsey research this week saying that a large portion of the global workforce could be displaced by 2030. The report estimates that between 400 million and 800 million people could be displaced by automation and need to find work. The professions that are more physical labor will be the most likely to see automation take over such machine operators and preparing fast food. Jobs that involve content providing, managing people and the like would be least impacted. In addition, jobs like gardeners, plumbers and, health care providers – will likely see less automation.

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Home Equity all time high | Sales of new homes rose | Black Friday sales were up

November 27, 2017

The Federal Reserve reports that home equity hit an all-time high in mid-2017 at $13.9T, up $0.5T from the 2006 peak and up $6T from the lowest point in the Great Recession. Quickly rising home prices are the main reason for the equity gains. Increasing home prices have also helped many homeowners to come out of negative equity. There were 12.2 million homeowners in negative equity at the end of 2009. That number has now decreased to just under 3 million in 2017.

The Commerce Department reported on Monday that sales of new homes rose to their highest level in 10 years due to strong sales across the country. New Home Sales rose 6.2% in October from September to an annual rate of 685,000 units, above the 629,000 expected. September was revised to 645,000 from 667,000. Strong sales were seen in the Northeast, Midwest, South and West. Year-to-date New Home Sales rose 18.7%. There is a 4.9 month supply of new homes for sale on the market, where a six-month supply is seen as a healthy balance between supply and demand.

Shoppers were out in full bloom as they shopped online on Thanksgiving and hit the malls on Black Friday. Black Friday and Thanksgiving online sales show U.S. retailers raking in a record $7.9B, up nearly 18% from a year ago. Cyber Monday is now underway and record online sales are expected to the tune of $6.6 billion. Total holiday sales are expected to come in between $678.75 billion to $682 billion, up from $655 billion last year.

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Mortgage Credit, Home Price Sentiment Index, Mortgage rates edged lower in latest week

November 08, 2017

The Mortgage Bankers Association (MBA) reported this week that mortgage credit availability tightened a bit in October following some loosening in September. The MBA’s Mortgage Credit Availability Index (MCAI) fell by 0.2% to 181.0 with two of the four components decreasing. A decline in the MCAI indicates that lending standards are tightening, while increases in the index are indicative of loosening credit. Lynn Fisher, MBA’s Vice President of Research and Economics says, “While government and conforming credit programs saw slight increases in availability in October, a moderate decrease in the number of investor jumbo offerings resulted in a decrease in the total index.”

Government sponsored entity Fannie Mae released its Home Price Sentiment Index (HPSI) on Tuesday slipping on diminished home buyer and seller sentiment. Fannie’s HPSI fell 3.1 points on October to 85.2, falling from its all-time high matched in September. The net share of respondents who said now is a good time to sell a home decreased 8 percentage points compared to September while the net share who reported that now is a good time to buy a home fell 6 percentage points in October.

Mortgage rates edged lower in the latest week as reported by the Mortgage Bankers Association. The 30-year conforming fixed-rate mortgage fell four basis points to 4.18%, while the 30-year fixed-rate mortgage with jumbo loan balances declined to 4.12% from 4.16%. The MBA also reported that its refinance index fell 0.5%, purchase index +0.5%. Mortgage rates remain just above all-time lows.

Man counting using calculator and stress in problem with expenses.

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Home Prices surged, Sales are up, good time to purchase a home

November 07, 2017

CoreLogic reports that home prices nationwide, including distressed sales, surged by 7% in September 2017 compared to September 2016. Month over month, sales were up 0.9% in September from August. Limited inventories coupled with low home loan rates continue to be the catalysts driving higher home prices. In addition, a strengthening economy and healthy consumer balance sheets were also contributing factors to the rise in prices. Looking ahead, prices are expected to rise 4.7% from September 2017 to September 2018.

Black Knight reports that housing affordability improved in September as the average homeowner needed 21.4% of their median income to purchase a home. That is below July’s post-recession peak of 21.7% and well below the 26.2% needed in the years before the housing boom from 2000 to 2003. Black Knight went on to say that “affordability across most of the country still remains favorable to long-term benchmarks.”

The National Association of REALTORS® (NAR) reports that due to an improving economy, job growth and rising consumer confidence, that now is a good time to purchase a home. The NAR reports that there will be 5.47 million Existing Home Sales in 2017, the fastest pace since 6.47 million in 2006. Looking out to 2018, the NAR predicts that sales will grow by 3.7% to 5.67 million. The NAR said the greatest hurdle for home sales in 2018 is the limited supply of homes for sale on the market.

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Home price gains remained solid in August, Consumer Confidence Soared, Holiday sales are expected to increase

October 31, 2017

Home price gains remained solid in August due in part to low mortgage rates and an improving economy. The S&P/Case-Shiller 20-City Home Price Index rose 5.9% year over year, in line with estimates. David M. Blitzer, managing director and chairman of the Index Committee at S&P Dow Jones Indices, said, “Home price increases appear to be unstoppable.” On a national basis, home prices rose 6.1% from August 2016 to August 2017, up from 5.9% in the previous month.

Americans were upbeat on the U.S. economy and future prospects in October, reports the Conference Board. The Consumer Confidence Index soared to 125.9 this month, the highest since December 2000. The percentage saying business conditions are “good” increased from 33.4% to 34.5%, while those saying business conditions are “bad” rose marginally from 13.2% to 13.5%. However, there was a slight downside in the report. The outlook by consumers on the job market was somewhat less favorable than in September.

The National Retail Federation (NRF) recently reported that holiday sales in November and December are expected to increase between 3.6% and 4%, excluding automobiles, gasoline and restaurants. The total dollar amount should come in around $682 billion, up from $655.8 billion last year. This year, Christmas comes 32 days after Thanksgiving, giving shoppers one more day to finish their shopping. This year’s forecast of 3.6% would match last year’s and is just above the five-year average of 3.5%.

Young attractive businessman with bags in hands

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Hurricanes put a dent in hew home construction, Single family housing starts fell, mortgage rates unchanged

October 18, 2017

Hurricanes Harvey and Irma put a dent in new home construction in Florida and southern Texas. The Commerce Department reported that total September Housing Starts fell 4.7% from August to an annual rate of 1.127 million units versus the 1.160 million expected. It was the lowest level since September 2016; however, from September 2016 to September 2017, starts were up 6.1%.

Single family Housing Starts fell 4.6% percent from August, although they were up 5.9% from September 2016. Multi-dwelling starts with five or more units, saw a drop of 6.2% from August and a 7.9% rise over September 2016. Overall, the South saw a 9.3% decline in September, while gains were seen in the Northeast, Midwest and West. Building Permits, a sign of future construction, fell 4.5% from August to an annual rate of 1.215 million units, just below the 1.225 million expected.

Mortgage rates were essentially unchanged in the latest week as reported by the Mortgage bankers Associaiton (MBA). The 30-year fixed-rate mortgage with conforming loan balances ($424,100 or less) decreased to 4.14% from 4.16%, with points remaining unchanged at 0.44. The MBA’s Market Composite Index, a measure of total mortgage loan application volume, rose 3.6% in the latest week. The refinance index rose 3%, while the purchase index was up 4%.

Mortgage Calculator Showing Purchase Of Home Loan

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Home Purchase Sentiment Index is up, Small Business Optimism fell in September, US Foreclosure rate at low

October 10, 2017

Fannie Mae reported its September Home Purchase Sentiment Index (HPSI) on Monday revealing overall housing confidence is up on rising renter optimism. The Fannie Mae HPSI increased 0.3 points in September to 88.3, matching the all-time high set in June. Americans who feel that it is a good time to buy a home rose last month. Renter respondents also showed increased optimism on purchasing a home. “The biggest driver for the increase in the HPSI is the rebound in the good time to buy sentiment, which outweighed the largest drag—a sizable reduction in the net share of consumers expecting home prices to rise over the next year,” said Doug Duncan, senior vice president and chief economist at Fannie Mae.

The NFIB Index of Small Business Optimism fell in September from 105.3 to 103.0, led by a big drop in sales expectations, not just in the storm-affected states, but across the nation. Within the report it showed that the number of small business owners who expected better sales plunged a net 12 points last month. Owners who think that it’s a good time to expand dropped a net 10 points. The NFIB says that the index remains very high by historical standards.

Analytics firm CoreLogic reports that the U.S. foreclosure rate remained at a 10-year low in July as the housing market continues to improve. The report showed that in July 2017, 4.6% of mortgages were delinquent by at least 30 days or more including those in foreclosure. That is below the 5.5% rate in July 2016. In addition, as of July 2017, the foreclosure inventory rate was 0.7% lower from 0.9% in July 2016.

Barber in barbershop

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