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%.
June 08, 2021
Job openings continued to surge in April after a record-high number of openings seen at the end of March. The Bureau of Labor Statistics reports that there were 9.3 million job openings at the end of April after the 8.1 million seen in March. The JOLTS or Job Openings and Labor Turnover Summary showed openings increased in a number of industries with the largest increases in accommodation and food services (+349,000), other services (+115,000) and durable goods manufacturing (+78,000). In addition, the NFIB reports that a record high 48% of business owners have unfilled job openings. On Thursday, the inflation reading Consumer Price Index for May will be released and will be closely watched by both the Fed and the investing community. The 4.2% increase in April was the largest jump over a 12-month period since a 4.9% rise for the year ending September 2008. Most pundits saw an increase in prices in May and June and possibly even July with a decline seen beginning in August through the end of the year. Once again, headline inflation will be much higher than the average 30-year fixed-rate mortgage – something that has not been seen in 50-years and is unsustainable longer-term.
June 02, 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 was at 3.17% with 0.39 in points for the week ending May 28, 2021. The Market Composite Index, a measure of total mortgage loan application volume, fell 4%, the Purchase Index declined by 3.1% while the Refinance Index declined by 4.6% and was 6% higher from a year ago. Spokesperson Joel Kan said, “Tight housing inventory, obstacles to a faster rate of new construction, and rapidly rising home prices continue to hold back purchase activity.”
The housing market continues to heat up as low supply and high demand continues to push up home prices and the amount of homes that sold above listing prices. The report shows that a bit more than half of homes (51%) have sold above their listing price in the four week period ending May 23, 2021, up from 26% one year ago. Also, many other sales records were hit which include the median home sale price of $354,250 and the number of days on the market, 17, from 36 a year ago. Asking prices also reached an average of $361,875, another record high.
May 25, 2021
Sales of new single‐family houses in April 2021 were at a seasonally adjusted annual rate of 863,000, according to estimates released today by the U.S. Census Bureau. That was down nearly 6% monthly and below the 980,000 expected. Due to the lock downs last year and with little activity seen in April 2020, sales are up a whopping 48.3% year over year. The four major regions across the country saw losses on a monthly basis with big gains seen annually. The median sales price of new houses sold in April 2021 was $372,400. The average sales price was $435,400. Supply of homes for sale on the market is at 4.4 months at the current sales rate.
After the big rebound seen over the past four months, the Consumer Confidence Index was unchanged in May at 117.2 from 117.5 in April. Consumers’ appraisal of current conditions improved in May while optimism regarding the short-term outlook edged lower in May. Consumers were also less upbeat about the job market as the proportion expecting more jobs in the months ahead fell. On the income front, some consumers expect their incomes to increase in the next six months. Lynn Franco, Senior Director of Economic Indicators at The Conference Board said, “Overall, consumers remain optimistic, and confidence should remain resilient in the short term, as vaccination rates climb, COVID-19 cases decline further, and the economy fully reopens.”
The sort of backward looking Case-Shiller 20-City Home Price Index for March saw prices surge 13.3% from March 2020, the largest annual increase since December 2013. The National Home Price Index, covering all nine U.S. census divisions, jumped 13.2% annually, up from 12.0% in the previous month. The same ongoing problems continue to hit the housing industry … the lack of supply along with rising material costs and constrained supply chains.
May 21, 2021
First-time unemployment claims fell to the lowest level since the shutdowns began last year. Weekly Initial Jobless Claims decreased to 444,000 for the week ended May 15, 2021, from 478,000 in the previous week. To put it into perspective, the week of April 4, 2020 claims were over 6 million as the shutdowns took hold. Continuing claims, or those receiving benefits for at least two weeks straight, were at 3.751 million from 3.640 million. With more and more states reopening their economies, many unemployed Americans should be able to go back to work.
Home borrowing costs inched higher this week and remain at historically low levels. Freddie Mac reports that the 30-year fixed-rate mortgage rose six basis points to 3.0% with 0.6 in points and fees. A year ago at this time, the rate was 3.24%. It is up from 2.65% on January 7 of this year. Sam Khater, Freddie Mac’s Chief Economist said, “Despite this favorable rate climate, there remains a shortage of homes for sale. The lack of housing supply has been compounded by labor disruptions and expensive building materials that are driving up the cost of new housing, making it difficult for homebuyers to find homes to purchase.”
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.”
May 12, 2021
The ongoing labor shortage in parts of the country continues to plague small businesses. The NFIB released its small business optimism report revealing that 44% of owners reported job openings can not be filled. Within the report, it showed that the Small Business Optimism Index rose to 99.8 in April, an increase of 1.6 points from March. Chief Economist Bill Dunkelberg said, “Finding qualified employees remains the biggest challenge for small businesses and is slowing economic growth. Owners are raising compensation, offering bonuses and benefits to attract the right employees.”
Jobs were plentiful at the end of March as most of the country has now reopened. The Bureau of Labor Statistics reports there were a series-high 8.1 million job openings on the last day of March in its Job Openings and Labor Turnover Summary (JOLTS). The job openings series began in December 2000. Job openings increased in several number of industries with the largest increases in accommodation and food services with +185,000.
The cost to fill your tank jumped in the latest week due in part to the recent cyber attack on the Colonial Pipeline, which delivers approximately 45% of all fuel to the East Coast. The national average price for a regular gallon of gasoline rose 6 cents to $2.98 this week and look for prices to creep higher in the coming weeks. A month ago the price was $2.86, a year ago it was $1.84.
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.
May 05, 2021
Home borrowing costs were essentially unchanged in the latest week and remain at historically low levels. The Mortgage Bankers Association reports that the 30-year fixed-rate mortgage rose to 3.18% from 3.17% with 0.34 in points for the week ended April 30, 2021. The Market Composite Index, a measure of total mortgage loan application volume, fell 0.9%, while the Purchase Index declined by 2%. The Refinance Index was unchanged and is down 17% from a year ago. Spokesperson Joel Kan said, “Both conventional and government purchase applications declined, but average loan sizes increased for each loan type. This is a sign that the competitive purchase market, driven by low housing inventory and high demand, is pushing prices higher and weighing down on activity.”
Activity in the service sector of the U.S. economy slipped in April from March but remains at expansionary levels. The ISM Service Index fell to 62.7 in April from 63.7 in March. A reading above 50 indicates the services sector economy is generally expanding; below 50 indicates the services sector is generally contracting. Economic activity had expanded for 11 straight months and expanded for all but two of the last 135 months. The April reading is one point lower from the all-time high hit in March (63.7). Within the report, it showed that the employment component increased.
The U.S. labor market continues to rebound as the financial markets received a strong report from the private sector. ADP private payrolls rose by 742,000 in April, near estimates while March was revised higher to 565,000 from 517,000. Small business growth was 235,000, medium grew by 230,000 while large businesses were up 277,000. The labor market continues an upward trend of acceleration and growth, posting the strongest reading since September2020,” said Nela Richardson, chief economist, ADP.
May 03, 2021
Manufacturing activity slipped in April from March but still remains well into positive territory as the country is almost fully reopened now. The ISM Manufacturing Index fell to 60.5 last month, below the 65.3 expected and down from 64.7 in March. This figure indicates expansion in the overall economy for the 11th month in a row after contraction in April 2020. A company spokesperson said, “Companies and suppliers continue to struggle to meet increasing rates of demand due to coronavirus (COVID-19) impacts limiting availability of parts and materials.”
Lumber continues to soar and now sits at $1,600 per 1,000 square board feet. Last year this time the price was $342. This rise is too much too fast and will negatively impact new home sales at some point. The surge is due in part to the industry shutting down four months last year with surging demand in the current environment. The CEO of the National Association of New Home Builders, Jerry Howard, said there were “dark clouds” in the new home sales outlook when lumber was at $1,000. Mr. Howard has to be more concerned now.