Refinacing numbers drop, fixed rates rose, home price growth to moderate and add to inflation

July 21, 2021

Home borrowing costs were essentially unchanged last week and remain at historically low levels. The Mortgage Bankers Association reports that the 30-year fixed-rate mortgage rose two basis points to 3.11% with 0.43 in points for the week ending July 16, 2021. The Market Composite Index, a measure of total mortgage loan application volume, fell 4%, the Purchase Index declined 6% while the Refinance Index decreased by 3%. Spokesperson Joel Kan said, “Refinance activity fell over the week, but because rates have stayed relatively low, the pace of applications was close to its highest level since early May.”

Fannie Mae released its July Commentary revealing that historically high home price growth is expected to moderate but add to overall inflation pressure. The GSE was expecting home price growth to increase by 8% in 2021 but now it has surged to near 5% this year. However, home price growth will cool in 2022 increasing by 5.1%. Fannie Mae reports that 2021 mortgage originations are now forecast at $4.2 trillion, up from last month’s forecast of $4.1 trillion, with both purchase and refinance origination activity projected to be higher. On the economic front, Gross Domestic Product this year is estimated to rise 7%.

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Home Building Market Experiencing Rising Costs,Lumber Prices coming down

May 17, 2021

The home building market continues to experience pains as rising costs continue to plague the market. Despite rising costs, the NAHB Housing Market Index remained at 83 this month and near record highs for newly built single-family homes. Any number over 50 indicates that more builders view conditions as good than poor. The component measuring traffic of prospective buyers fell one point to 73. “Low interest rates are supporting housing affordability in a market where the cost of most materials is rising,” said NAHB Chief Economist Robert Dietz. “In recent months, aggregate residential construction material costs were up 12 percent year-over-year, and our surveys suggest those costs are rising further.

Lumber prices are retreating from record highs which is a positive sign for home builders who have been dealing with soaring prices over the past year. Prices have fallen to near $1,300 from the record high $1,700 seen in the past two weeks as production continues to ramp up and as commodity traders book some profits. “Rising materials prices are significantly driving up prices for single-family homes and apartments,” wrote NAHB Chief Economist Robert Dietz. “Combined with expectations of rising interest rates, these higher prices place additional pressure on housing affordability, which continued to decline in the first quarter.”

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New Construction Costs impact housing affordability, inflation

May 10, 2021

A host of costs contribute to the price of a new single-family but regulation costs are front and center. The NAHB reports that the cost of regulations imposed by all forms of government adds a whopping $93,000 to the cost. The NAHB says that $93,870 is made up of $41,330 is attributable to regulation during development while the $52,540 comes from regulation during construction. “This study illustrates how overregulation is exacerbating the nation’s housing affordability crisis and that policymakers need to take bold steps to reduce or eliminate unnecessary regulations that will help builders increase the production of quality, affordable housing to meet growing market demand,” said NAHB Chairman Chuck Fowke.

Inflation is the new buzzword on Wall Street as consumer prices push higher with most states now fully reopened. Prices for goods and services have been on the rise due in part to pent-up consumer demand. A recent survey conducted by the New York Federal Reserve showed that inflation expectations are to increase in the short-term, remain stable in the medium-term. The median year-ahead inflation expectations increased to 3.4% in April from 3.2% in March, while remaining unchanged at 3.1% at the three-year horizon. The one-year ahead measure is now at its highest level since September 2013. Fed Chair Powell has said that any rise in inflation will be transitory.

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March Housing Starts Surge

April 16, 2021

March Housing Starts jumped nearly 20% from February to an annual rate of 1,739,000 versus the 1,621,000 expected. Single-family starts, which make up the bulk of the market, saw a jump of 15% to 1,238,000 units. Building Permits, a sign of future construction, saw a near 5% gain to an annual rate of 1,766,000. Multi-family units rose 30%. However, the market is still being plagued by low inventories and with the labor market continuing to improve, there could be more buyers on the scene in the months ahead. Remember, jobs buy houses.


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U.S. economy – show me the numbers

December 23, 2019

The U.S. economy continued to generate growth in the final reading on Gross Domestic Product (GDP) for 2019. Final Q3 GDP remained unchanged at a solid 2.1%. Within the numbers, it showed that consumer spending, which accounts for two-thirds of U.S. economic activity, was revised higher to 3.2% from 2.9%. The consumer continues to be a key factor driving the economic expansion here in the U.S.GDP measures the market value of all the final goods and services produced in a specific time period, often annually.

Consumer Sentiment remained at very favorable levels in the second of two reading in December at 99.3. Inflation expectations declined in the December survey, with both the year-ahead and five-year expected inflation rates falling and backs up the federal reserves assertion that it will remain low for the foreseeable future. In addition, the impeachment hearing had a barely noticeable impact on economic expectations, as it was mentioned by just 2% of all consumers in the December survey.

U.S. stocks are at fresh record highs on this last full week of trading in 2019. The closely watched S&P 500 is up nearly 30% this year due to an expanding economy, low unemployment, strong consumer spending and confidence along with tame inflation and low-interest rates. The Goldilocks economy continues with chances of a recession extremely low or zero for the foreseeable future.

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Good news, mortgage credit, and China

December 10, 2019

The good news continues to stream in from the small business sector of the economy. The NFIB (National Federation of Independent Business) Small Business Optimism Index saw its largest month-over-month gain since May 2018, up 2.3 points to 104.7 in November. The NFIB said that overall, the Main Street economic machine continued to push the economy forward. “Owners are aggressively moving forward with their business plans, proving that when they’re given relief from the government, they put their money where their mouth is, and they invest, hire, and increase wages,” said NFIB Chief Economist William Dunkelberg.

Mortgage credit availability increased across all loan types in November, reports the Mortgage Bankers Association. The mortgage credit availability index rose by 2.1% to 188.9 last month. A decline in the MCAI indicates that lending standards are tightening, while increases in the index are indicative of loosening credit. The index was benchmarked to 100 in March 2012. Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting said, “Expanding credit availability will continue to support active levels in mortgage lending, even as refinance activity starts to level off.”

The December 15 tariff deadline on Chinese exports into the U.S. could be delayed as the two sides continue to negotiate. The White House continues to stress that Beijing commit to large purchases of U.S. farm products in order for the tariffs to be delayed. The headlines are supporting the U.S. stock markets though the gains are modest at best as the market looks ahead to the Federal reserve’s release of its monetary policy statement on Wednesday afternoon.

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Business and Hiring Remain Strong

January 08, 2019

The NFIB Small Business Optimism Index was essentially unchanged in December just below record highs at 104.4. The NFIB said that unfilled jobs and the lack of skilled qualified applicants continue to be the primary driver of the frothy index, with job openings setting a record high and job creation plans strengthening. “Optimism among small business owners continues to push record highs, but they need workers to generate more sales, provide services, and complete projects,” said NFIB President and CEO Juanita D. Duggan.

The JOLTS report (Job Openings and Labor Turnover Survey) showed that there were 6.9 million job openings at the end of November, just below record high of 7.1 million set back in August, strengthening the data from the NFIB. Job openings increased in transportation, warehousing, and utilities while declines were seen in other services and construction. The December Jobs Report showed a whopping 312,000 new workers were hired as the labor market continues to move to greener pastures.

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Producer Price Index, Small Business Optimism rose, Mortgage applications strong

November 14, 2017

The October Producer Price Index (PPI) rose 0.4% versus the 0.1% expected, fueled by higher costs for services. Core PPI also rose 0.4%, above the 0.2% expected. Year over year, PPI rose 2.8%, the biggest increase since February 2012, while Core PPI increased 2.4%. The PPI is a family of indexes that measures the average change in selling prices received by domestic producers of goods and services over time.

The NFIB’s Small Business Optimism Index rose to 103.8 in October from 103 the previous month as more owners expect higher sales and think now is a good time to expand. Thirty-five percent of all owners reported job openings they could not fill in the current period, up 5 points, the highest reading since November 2001. “Owners became much more positive about the economic environment last month, which suggests a longer-run view,” said NFIB Chief Economist Bill Dunkelberg. “In the nearer term, they are more optimistic about real sales growth and improved business conditions through the end of the year.”

The Mortgage Bankers Association reports that its Builder Application Survey soared 23% in October after plunging 20% in September due in part to hurricanes Harvey and Irma. It was the strongest month in 2017. From a year ago, the index is up 16.1%. By product type, conventional loans made up 71.8% of loan applications while the average loan size for new homes hit a high of $339,534.


Antique store owner

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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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Inflation gauge, Rate hike not expected, Redfin reported new home build price rose in Q3

October 30, 2017

The Fed’s favorite inflation gauge, the year-over-year Core PCE, remained at 1.3% in October, well below the 2% target that the Fed has been looking for. On a monthly basis, the Core PCE was unchanged at 0.1%. The Fed has said that it will most likely raise rates at the December FOMC meeting, despite the low inflation levels. Within the report it also showed that Personal Spending recorded its largest increase in more than eight years last month, rising 1.0% versus the 0.8% expected. That is good news heading into to the holiday shopping season. Personal Incomes were up 0.4%, just above the 0.3% expected.

The two-day Federal Open Market Committee meeting kicks off on Tuesday and ends Wednesday with the 2:00 p.m. ET release of the Fed’s monetary policy statement. A rate hike to the short-term Fed Funds Rate is not expected at this meeting. The Fed members will most likely repeat that economic activity has been rising moderately so far this year while job gains have remained solid in recent months. The decline in job growth in September will most likely be mentioned as well but the Fed has already said that the weak numbers were due to hurricanes Harvey and Irma.

Residential real estate company Redfin reported recently that the average price of a newly-built home rose in the third quarter of 2017. The average price rose to $374,000, up 3.3% year-over-year compared to existing home prices. The report went on to say that one in eight homes for sale in September were new construction, compared to one in 13 five years ago. “After almost a decade of underproduction, we are finally seeing a slow, steady increase in single-family housing starts, up 9% from a year ago,” said Redfin Chief Economist Nela Richardson.

Builder in new home

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