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GDP grew in Q3, Consumer sentiment below expected for October, Home prices rose

October 27, 2017

The Bureau of Economic Analysis reports that Gross Domestic Product (GDP) grew by a solid 3% in the third quarter based on the first of three readings. Gains were led by private inventory investments, exports and federal government spending. Within GDP, consumer spending increased 2.4% following the 3.3% rise in Q2. GDP is the monetary value of all finished goods and services produced within a country’s borders in a specific time period. It is considered the broadest measure of economic activity.

Consumer Sentiment came in at 100.7 for the final reading in October, just below the 101.0 expected and remains at lofty levels. The report revealed that personal finances were judged near all-time record favorable levels due to gains in household incomes as well as decade highs in home and stock values. Chief economist, Richard Curtin said, “Lingering doubts about the near-term strength of the national economy were dispelled as more than half of all respondents expected good times during the year ahead and anticipated the expansion to continue uninterrupted over the next five years.”

The Federal Housing Finance Agency reported this week that home prices rose 0.7% from July to August with a 6.6% jump year over year. The FHFA monthly Home Price Index is calculated using home sales price information from mortgages sold to, or guaranteed by, Fannie Mae and Freddie Mac. The index doesn’t include high-end homes purchased with jumbo loans or cash sales.

 

The front facade of a modern contemporary A frame style home.

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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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Housing Market Index, US Stocks closed at record high levels yesterday, UK Consumer Price Index

October 17, 2017

Homebuilder sentiment pushed higher in October as builders rebounded from the initial shock of the hurricanes. The NAHB Housing Market Index rose 4 points in October to 68, above the 64 expected and up from 64 in September. The report showed that the component gauging current sales conditions rose 5 points to 75 and the index measuring sales expectations in the next six months increased 5 points to 78. Meanwhile, the component measuring buyer traffic ticked up a single point to 48. “It is encouraging to see builder confidence return to the high 60s levels we saw in the spring and summer,” said NAHB Chief Economist Robert Dietz.

U.S. Stocks closed at record high levels yesterday. The Dow closed at 22,956.96; S&P 500 at 2,557.64; while the tech-heavy NASDAQ closed at 6,624.00. The new mantra for Stocks, “buy high and sell higher.” Equities can’t continue this blistering pace, there has to be some sort of correction. The S&P is currently trading near unchanged this morning while the Dow hit 23,000 for the first time ever.

The United Kingdom (U.K.) Consumer Price Index hit 3% in September, the highest since March 2012. This is important to watch as low inflation around the globe has been a major tailwind for higher Bond prices and lower yields for a long time. The rise in U.K. inflation comes after Fed Chair Yellen said on Sunday that she expects inflation to bounce back soon. At the moment, the Core Personal Consumption Expenditure, the Fed’s favorite inflation gauge, is running at 1.3% year over year, way below the 2% the Fed is looking for. So, persistently low inflation here in the U.S. remains a “mystery” and is a major reason why long-term Bond yields are so low.

House Symbols Displaying Houses Or Homes For Sale

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WHAT HAPPENED IN THE BOND MARKET YESTERDAY?

March 20, 2014

A surprise from Fed Chair Yellen (see below) caused a large decline in MBS prices this afternoon. No economic data was released today. The Dow is down 110 points. Tomorrow, Jobless Claims, Existing Home Sales, Leading Indicators, and Philly Fed will be released.

As widely expected, the Fed scaled back its bond purchases by $10 billion to $55 billion per month. Fed officials have long maintained that they expect that the fed funds rate will remain near zero for a “considerable period” of time following the end of the Fed’s bond purchases. The big surprise today came during Janet Yellen’s first press conference as Fed Chair, when she defined the meaning of a “considerable period” as about six months. According to Yellen, if the Fed’s economic outlook does not change significantly, the bond purchases are expected to end in the fall of this year. This would place the first fed funds rate hike in the spring of next year. Before today’s comments, the market consensus was for the first rate hike to take place during the fall of next year. The Fed statement also removed the 6.5% Unemployment Rate threshold as a potential trigger for raising the fed funds rate. Instead, the Fed will use a wide range of labor market and inflation indicators to  determine when to begin to raise rates. Basically, the Fed’s targets are 2.0% core inflation and “full employment”. With the February Core Consumer Price Index (CPI) at an annual rate of just 1.6%, inflation is well below the Fed’s target, and most signs suggest that considerable slack remains in the labor market. Still, Fed officials expect increases in the fed funds rate to take place sooner than previously expected.

 Information provided by “Larry Baer and Market Alert, Inc” via Lynette Conley, Account Executive, Premier Lending

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