April 30, 2015
The number of Americans filing for first time unemployment benefits fell to a 15-year low in the latest week, signaling that the downtick in March was just a one-time event. Weekly Initial Jobless Claims fell by 34K to 262,000 versus the 290,000 expected. The 262,000 was the lowest level since April 2000. A recent report from the Labor Department showed that job openings rose to their highest level in 14 years, which is signaling stronger job growth in the months ahead.
Another good sign that the labor market is improving was a report out today that revealed that labor costs rose in the first quarter of 2015. As labor costs rise, the job market tightens, which should eventually lead to a rise in workers’ wages. The Employment Cost Index rose by 0.7% in the January through March period, just above the 0.6% expected. On an annual basis, employment costs rose 2.6%, the fastest rise since the fourth quarter of 2008. As the economy continues to heal, economists feel that wages should continue to increase.
Home ownership rates have moved to their lowest levels since 1990 due to weak income growth and hard-to-get financing to purchase a home. The rate fell to 63.8% in the first quarter of 2015, the lowest since the end of 1989. Other factors that are holding back a higher percentage of homeownwership: higher prices along with millions of properties being underwater, which is when a homeowner owes more than the home is worth. And while the rate has declined, the 63.8% is more inline with the average long term trend between the 1960’s and 1990’s.
April 29, 2015
Harsh weather coupled with the West coast port strike earlier in the year put a big dent in economic growth in the first quarter of 2015. Throw in a strong dollar and it equaled just a 0.2% rise in Gross Domestic Product (GDP). The 0.2% was far below the 2.2% recorded in the fourth quarter of 2014.Within the report it revealed that consumer spending sank to 1.9% from the previous reading of 4.4%, and below the 2.3% average gain since the U.S. recovery began in mid-2009.
The report also said that due to the strong dollar, exports declined 7.2%. In addition, because of the fall in oil prices, investments in mining exploration, shafts and wells, for example, plummeted 48%. Many economists expect a rebound in the second quarter and beyond, similar to what took place in 2014. GDP measures the value of the production of goods and services in the U.S., adjusted for price changes.
In housing and mortgage related news, March Pending Home Sales, rose by 1.1%, which was near inline with expectations. Sales are up 11% from the same time last year and are at the highest level since June 2013. The Mortgage Bankers Association reported today that its Market Composite Index, a measure of total home loan applications, fell 2.3% in the week ending April 24, led by a decline in refinancing. The purchase index was unchanged, while the refinance index declined by 4%. A modest rise in home loan rates was a contributing factor.
April 28, 2015
Single-family home prices rose across the nation with a big concentration led by the West, as reported by the Case Shiller 20-city Index. On a year-over-year basis, prices rose 5.0% from February 2014 through February 2015, the fastest growth in six months, and above the 4.7% expected. From January to February, prices rose 0.5%. However, it was noted that home price gains continue to rise and outpace both inflation and wage gains. The report measures the change in prices of a group of homes in 20 major metropolitan areas in the U.S.
Consumers weren’t feeling that confident in April as job growth stalled, which more than offset low gas prices. The Conference Board’s Consumer Confidence Index fell to 95.2 this month, well below the 102.2 expected and down from 101.4 reported in March. The 95.2 represents the lowest level in 2015. Job growth slowed to 126,000 in March, which was the lowest since December 2013. A Conference Board spokesperson said there is little to “suggest that economic momentum will pick up in the months ahead.”
Apple reported yesterday that the company sold 61 million iPhones in its latest quarterly earnings report with $58 billion in revenues and profits of $13.6 billion – records for the second quarter. The news sent the price of shares of Apple to an all-time high of near $135. Apple also announced that it is increasing its dividend to shareholders to 52 cents a quarter, an 11% increase. The news comes just after the release of its newest device, the Apple Watch.
April 27, 2015
The analytics and data division of Black Knight Financial Services reported on Monday that home prices rose by 0.7% from January to February, the largest monthly increase since June 2014. Within the report it showed that home prices in three of the nation’s 20 largest states (Colorado, New York and Texas) hit new highs in February. Of the 20 largest states, Connecticut, Massachusetts, New Jersey and Pennsylvania all saw prices decline in February; of those, only Connecticut saw a yearly decline.
The regularly scheduled Federal Open Market Committee meeting will kick off on Tuesday and will culminate with the monetary policy statement being released on Wednesday. There is no chance of a hike in the short term Fed Funds rate, currently at 0.25%. The talks will most likely center around when the Federal Reserve will begin a hike in the Fed Funds Rate, a topic that has been highly talked about by investors. With the latest stream of tepid economic data and low inflation, a hike could now be pushed back until later in the year, instead of the anticipated June liftoff.
A recent survey by Berkshire Hathaway Home Services Homeowner Sentiment showed that 94% of home owners and potential buyers said that home ownership is a stepping stone to their long-term financial planning. The survey went on to say that 88% felt it is important to update or renovate their home over time to increase its long-term value. A big segment of the market that has been in the news on a constant basis, the millennials, say that one of the major benefits to owning a home is to have a place they’re proud to show family and friends.
April 24, 2015
Radian Group Inc. is rolling out a new type of insurance, which is also an industry first: a policy to provide relief if a borrower loses their job. The company will be offering such a policy to those borrowers who put down less than 5% of the price of their homes. The policy will pay up to as many as six months of mortgage payments on new mortgages, for up to $9,000. It does, however, have a stipulation that it would have to be within the first two years of the mortgage.
The highly anticipated Apple Watch, Apple’s first new device in five years, is now on sale in stores. But just walking into an Apple store doesn’t guarantee that you will be able to scoop up the watch, which ranges from $349 to $17,000 (for a gold version). Apple stores are only showcasing the device with a few selected high end retailers actually selling it at their stores. Apple is urging loyal customers to order online.
In economic news, Durable Goods Orders surged in March rising by 4%, which was well above the 0.5% expected. But the big increase was led mostly by big gains in sales of vehicles and aircrafts. Within the report it showed that non defense capital goods fell by 0.5%, which is a key metric of business spending. In addition, orders decreased for machinery and primary metals, which could be attributed to the strong dollar for those multi-national US companies doing business abroad.
April 23, 2015
In stark contrast to yesterday’s robust March Existing Home Sales report, the Commerce Department reported that March New Home Sales declined by 11.4% from February to an annual rate of 481,000. The March rate was below the 520,000 that was expected and was the biggest drop in more than 1 1/2 years. However, the harsh winter weather in January and February closed down many construction sites around the country, which could push potential sales to April and may. The hardest hit area was the Northeast, declining by 33%, followed by a near 16% drop in the South, while the West saw a 3.4% decline. The Midwest bucked the trend, rising 6%.
Gas prices at the pumps rose to their highest level in 2015 hitting $2.49 in the latest survey. The uptick in prices is due to a rise in the price of oil, which was up 16% this month. Last year this time the price was $3.66, with the all-time high at $4.11 hit back in July of 2008. However, prices are expected to hit lows not seen since 2005 this summer and could hover near the $2 range. An analyst from GasBuddy.com said “A worldwide glut of petroleum will continue, putting more downward pressure on fuel prices through the summer.”
The foreclosure arena received news that the share of seriously underwater homes rose by 0.4% in the first quarter of 2015 from the fourth quarter of 2014. Though the increase was marginal, it was the first increase since the second quarter of 2012 and down 4% from last year. Daren Blomquist, vice president at RealtyTrac. went on to say that “the end of 2014 saw the lowest share of seriously underwater properties since we began tracking data, but in the first quarter that share bumped up slightly as home price appreciation continued to slow down in many markets.”
April 22, 2015
Positive housing news hit the wires today by way of March Existing Home Sales, as reported by the National Association of REALTORS®. Sales rose by 6.1% in March from February to an annual rate of 5.19 million units, well above the 5.05 million expected. It was the largest monthly increase since December 2010 (6.2%). Sales have now increased six consecutive months and are now up 10.4% from a year ago. “After a quiet start to the year, sales activity picked up greatly throughout the country in March,” said Lawrence Yun, NAR chief economist.
Home prices rose 5.4% year-over-year in the month ended in February, as reported by the Federal Housing Finance Agency (FHFA). The FHFA Home Price Index is calculated using home sale price information from mortgages sold to or guaranteed by Fannie Mae and Freddie Mac. On a monthly basis, prices were up 0.7%. The index is now just 2.7% below its March 2007 peak and is roughly the same as the January 2006 index level.
The spring home buying season is well underway, which typically runs from April through June. In its latest survey, the Mortgage Bankers Association (MBA) reported that home purchase applications surged 5% in the latest week as Americans took advantage of low home loan rates to secure financing for homes. The MBAs Market Composite Index, a measure of total loan application volume was up 2.3%, while the refinance index saw little change.
April 21, 2015
The National Association for Business Economics reported this week that U.S. businesses expect sales to rebound anticipate hiring more workers in 2015. The first quarter of 2015 was a struggle for business owners, but they now feel that sales will ramp up in the next three months, according to a survey released on Monday. Almost three quarters of business owners surveyed expected higher sales for the second quarter, up from 68% from the January findings. Many business owners surveyed said that the West Coast port strike and the harsh winter weather, along with a strong dollar in the first quarter negatively impacted sales.
Prices at the gas pumps rose in the latest survey as oil prices jumped as supplies rose more slowly than expected. Though oil prices have risen lately, the national average price for a regular gallon of gasoline is at $2.46, still well below the $3.66 seen last year this time. California is the unfortunate state with the highest average price of $3.15 followed by Hawaii at $3.07 with the lowest seen in South Carolina at $2.21, Mississippi at $2.23 and Alabama $2.24.
April 20, 2015
New York Federal Reserve Bank President William Dudley spoke in New York today saying that he feels that economic growth will rebound, which would warrant raising short term interest rates in 2015. The first quarter of 2015 saw growth slow in the first three months of the year, with the harsh weather early in the quarter the main culprit in the slowdown. A similar pattern occurred last year in the first quarter, only to see a big rebound for the rest of the year. “I believe that the growth prospects for the U.S. economy over the remainder of 2015 will improve, when, hopefully, the data supports a decision to lift off later this year, it does not mean that U.S. monetary policy will be tight.”
Fannie Mae released its April 2015 Economic and Housing Outlook on Monday revealing that economic activity was suppressed in the first quarter, largely due to the West Coast port disruptions along with the difficult weather patterns that gripped a large portion of the Northeast. The full year Gross Domestic Product remains unchanged at 2.8%. But beware, there is a risk tilted to the downside, consumers remain cautious, and the pick up in consumer spending, which is key to the rebound in growth, may be weaker than Fannie Mae anticipates.
In housing, Fannie Mae expects housing starts and home sales to rise about 13% and 5% respectively, little changed from the prior forecast. Fannie went on to say that it projects that total single-family mortgage originations will rise nearly 15 percent in 2015 to $1.35 trillion before declining modestly in 2016. As far as refinancing in 2015, the refinance share of total mortgage applications should decline to 35% in 2016, from 45% in 2015. Lastly, inventories remain very tight at the lower end of the market, making it difficult for potential first time homebuyers.
April 17, 2015
The recent rise in gas prices across the nation sent consumer prices higher in March, signaling a slight uptick in inflation. The rise in February and March, follows three straight months of declining prices, which was due in part to falling gas prices. The Consumer Price Index (CPI) rose 0.2% last month, which was just below the 0.3% expected. The Core CPI, was a bit hotter than expected at 0.2% versus the 0.1% expected, while the 12-month Core rose 1.8%.
The warmer weather in April has helped to improve consumer attitudes towards the economy and current financial situations, after a lull in sentiment early in the year. The Consumer Sentiment Index hit its second highest level in more than eight years rising to 95.9 this month, up from the 93 recorded in March. However, the report did reveal that consumers have a dimmer view regarding income prospects.
Food prices declined in March, which gave Americans some relief at the checkout counter at the grocery store. The Labor Department reported that the cost of food at home fell 0.5% in March, the biggest drop in almost six years. The decline was led by a decrease in fruits and vegetables, which helped to offset the rise in gas prices. But hold your applause, for prices are up 2.3% since last year, a big gain, despite the tame inflation environment. With the continued drought in California and with the peak growing season is almost upon us, prices could start to edge higher in the months to come.