May 29, 2015
U.S. economic growth in the first quarter of this year fell into negative territory, due in part to the West coast port strike, harsh winter weather, along with a widening trade deficit. The Bureau of Economic Analysis reported on Friday that the second estimate for Gross Domestic Product (GDP) fell by 0.7% in the first quarter, below the 0.2% that was originally reported. Current incoming data suggests a pick up in economic growth in the second quarter, but the number remains near the anemic 1% mark. GDP measures the value of the production of goods and services.
A report out on consumers’ assessments of the U.S. economy soured in May and fell to the lowest level in 2015. Consumer Sentiment declined to 90.7 in May, below the 95.9 in April after hitting the highest level since 2004 back in January of 98.1. Slow wage growth, along with many Americans working part time have put a crimp in Americans attitudes towards the U.S. economy. Stagnant wage growth leads to reluctance in consumer spending in addition to holding off on purchasing homes.
The New York Federal Reserve Bank released its 2015 Housing Survey this week revealing that U.S. households, on average, expect home price growth to continue at a 4.4% pace over the next year. The survey also showed that respondents expect home loan rates to increase in coming years, but at a moderate rate. In addition, renters report that they would rather own than rent if they had the financial resources. Many renters feel that a mortgage would be hard to obtain, although responses suggest a slight easing in perceived credit access.
May 28, 2015
Housing market news continues to stream in with favorable numbers this week after solid data from the Case-Shiller Home Price Index and New Home Sales earlier in the week. The National Association of REALTORS® (NAR) reported on Thursday that Pending Home Sales in April rose by 3.4%, led by the Northeast and Midwest, while all regions saw gains. The index now stands at 112.4, up 14% from April 2014 and at the highest level since May 2006 (112.5). A spokesperson from the NAR said that foot traffic remains elevated, despite limited inventory shortages in many metro areas.
The solid housing data has driven home loan rates to new highs for 2015, though still just above historically low levels. The 30-year fixed conventional home loan rate ($417,000 or less) rose to 3.87% with 0.6 in points and fees, according to Freddie Mac. A report released today by realtor.com said that delaying a home purchase this year could cost you more money in the future. The report said that interest rates and home prices are expected to climb in the next year.
Americans filing for first time unemployment benefits continue to hover near multi-year lows in the latest week as the job market continues to improve. Weekly Initial Jobless Claims rose by 7,000 in the latest week to 282,000, above the 274,000 expected. Claims have now remained below the 300,000 level for 12 straight weeks, which is a long period of time given the economic woes in the first quarter of the year. Within the report it showed that there are 2.2 million people receiving benefits after an initial week.
May 27, 2015
Luxury home builder Toll Brothers reported a better than expected quarterly profit due in part to a lower tax provision coupled with a pick up in business in California. Toll Brothers is forecasting an increase in housing demand with the improvement in the job market and an uptick in wages. The company reported net earnings per share of 37 versus the 35 cents expected on profits of $67.9 million, while total revenues edged lower by 1% to $852.6 million. Toll Brothers operates primarily in major metropolitan areas in the contiguous United States.
In yet another gauge on home prices, the Federal Housing Finance Agency (FHFA) reported on Monday that home prices rose 1.3% in first quarter of this year. The gain was the fifteenth consecutive quarterly price increase in the purchase only index. From February to March, prices were up 0.3%. The FHFA’s Home Price Index is calculated using home sales price information from mortgages sold to, or guaranteed by, Fannie Mae and Freddie Mac. Over the past 12 months from the first quarter of 2014 to the first quarter of 2015, the index was up 5%.
The U.S. Internal Revenue Service reported on Tuesday that a crime syndicate hacked into the IRS website and stole vital personal financial information of 104,000 taxpayers. The IRS website features a service called “Get Transcript”, where you can easily download several years of tax forms —this is where the thieves obtained the information. The crooks then used the data to claim tax refunds in other people’s names. But the IRS said that the information could be used for far more devious acts than just receiving the illegal returns … the fraudsters can open up bank accounts, credit lines and steal tax refunds in the future.
May 26, 2015
Housing news dominates the headlines this week. The Commerce Department reported on Tuesday that sales of newly constructed homes rebounded in April, up from the dip in March, as the spring buying season got underway. New Home Sales rose by 6.8% to an annual rate of 517,000, which was above the 510,000 expected. Since April 2014, sales are up a whopping 26%. The median price for a newly constructed home in April was $297,300, up 8.3% from a year ago. The report comes after a contrast in Existing Homes, which makes up a bulk of the market, which fell 3.3% in April.
Data from the Case Shiller 20-city Index on a year over year basis revealed that home prices rose by 5% from March 2014 to March 2015. Home prices have now risen year-over-year for 35 consecutive months following the housing bubble bust in 2007 and 2008. The 5% gain was above the 4.6% expected, while matching the February annual gain. From February to March, prices were up 0.9%. “The pattern of consistent gains is national and seen across all 20 cities covered by the S&P/Case-Shiller Home Price Indices,” said David Blitzer, managing director and chairman of the index committee.
The last positive report today showed that May Consumer Confidence rose from April. The Index rose to 95.4 in May, above the 94 expected and up from April’s reading of 94.3. The report read that business conditions remained “good” last month, while the employment component said that those stating jobs are plentiful rose to 20.7% from 19%. The monthly Consumer Confidence Survey®, based on a probability-design random sample, is conducted for The Conference Board by Nielsen, a leading global provider of information and analytics around what consumers buy and watch.
May 22, 2015
The Labor Department reported on Friday that core consumer inflation, which strips out volatile food and energy, rose by the largest percentage since January 2013. The Core Consumer Price Index (CPI) rose 0.3% in April from March and above the 0.2% expected. The headline CPI actually fell to 0.1% from the 0.2% gain in March. The CPI is a closely watched gauge of the U.S. Federal Reserve, which is an important component in its decision to gauge monetary policy. CPI is an inflationary indicator that measures the change in the cost of a fixed basket of products and services, including housing, electricity, food and transportation.
The Mortgage Bankers Association (MBA) have revised their figures higher for mortgage originations in 2015. The revised figures come on the heels of an improving economy and job market, along with some upward pressure on wages. The MBA reports that there should be a total of $1.28 trillion in mortgage originations for 2015, compared to $1.12 trillion in 2014. In addition, refinances are expected to be $551 billion in 2015, compared to a previously estimated $510 billion. Purchase originations are expected to increase to $730 billion in 2015 from $638 billion in 2014. Also helping to boost mortgage applications is that home loan rates continue to remain near historically low levels.
Motor club AAA projects that 33 million Americans will be driving to their destinations this Memorial Day weekend between Thursday, May 21 to Monday, May 25. That’s a lot of cars on the road, but the good news is that the national average price for a regular gallon of gasoline is $2.66, down from the $3.66 we saw for the same period last year. The 33 million drivers on the road is up 5.3% from 2014. AAA said it expected to rescue 350,000 drivers at the roadside this weekend, due to dead batteries, flat tires and lockouts. So be sure to check your tires, battery and remember your keys.
May 21, 2015
The National Association of REALTORS® reported that Existing Home Sales in April fell by 3.3% from March to an annual rate of 5.04 million, below the 5.24 million expected. Despite the decline, sales have increased year-over-year for seven consecutive months and are up 6.1% from a year ago. The median price was $219,000, nearly 9% above April 2014, the 38th consecutive month of year-over-year gains. “April’s setback is the result of lagging supply relative to demand and the upward pressure it’s putting on prices,” said NAR Chief Economist Lawrence Yun.
Manufacturing in the Philadelphia and Kansas City regions slowed in the past few months as general activity, new orders and shipments were positive, but remained at low readings. The Philadelphia Fed Index fell to 6.7 in May from the 7.5 recorded in April. In addition, the employment component moderated compared with April. In Kansas City, its manufacturing index was -13 in May, down from -7 in April and -4 in March. The Kansas City Index of -13 is the lowest since the mid-2009 levels.
Home loan rates edged lower this week and fell for the first time in a month, slicing some cost for buyers during the busy spring buying season. Freddie Mac reported that the average fixed conforming 30-year home loan rate ($417,000 or less) fell to 3.84% with 0.7 in points and fees. A noted economist said that the general direction of rates will be higher this year as the economy continues to improve. But with solid employment numbers, the sector should be able to withstand modestly higher rates.
May 20, 2015
Home loan rates have edged higher in the past few weeks as Bond yields rose due a rosier economy and a strengthening job market. The Mortgage Bankers Association reported that the fixed 30-year conventional ($417,000 or less) rose to 4.04% in the latest survey, the highest since December 2014. The survey covers over 75% of all U.S. retail residential mortgage applications, and has been conducted weekly since 1990. Respondents include mortgage bankers, commercial banks and thrifts.
The minutes from the April Federal Open Market Committee meeting will be released today and could reveal the timing as to when short term interest rates, or the Fed Funds Rate, may begin to rise. The economy and the job market has been improving, but not to the point where a rate hike is necessary here in the first half of the 2015. The Fed Funds Rate is the interest rate at which depository institutions lend balances to each other overnight.
The U.S. Justice Department has levied massive fines against five global banking institutions over manipulations of foreign exchange rates. The banks include Barclays PLC, Royal Bank of Scotland PLC, JPMorgan Chase, Citigroup Inc, and UBS AG and will pay a collective fine of roughly $5.7 billion. The banks described themselves as members of “The Cartel” and used chat rooms and coded language to manipulate rates to increase profits.
May 19, 2015
The warmer temperatures in April helped home builders break new ground on housing units, with levels not seen in nearly eight years. The Commerce Department reported that Housing Starts surged by 20% in April from March to an annual rate of 1.14 million, which was also the biggest percentage gain in more than 24 years. The recent increase in the job markets, a strengthening in the economy, coupled with an uptick in home equity has led consumers to shed concerns and consider purchasing a new home.
The world’s largest retailer, Wal-Mart, reported that higher wages and a stronger dollar pushed corporate earnings short of expectations in its latest quarterly report. Wal-Mart reported net income of $3.34 billion and earnings of $1.03, just below the $1.05 expected and well below the $1.11 from the year ago period. The company has been under pressure to raise worker pay and benefits and has announced that it will raise the minimum wage to $9 per hour this year and $10 in 2016. This change has and will impact the bottom line, but with $3.34 billion in net income in the latest quarter, no one is shedding a tear for the retailer.
At a recent conference on the outlook of the housing economy at the Mortgage Bankers Association’s (MBA) National Secondary Market Conference, attendees from Fannie Mae, Freddie Mac and the MBA predicted that the U.S. Federal Reserve will begin to raise the Fed Funds Rate some time this year. The rise will most likely take place in September, after weak economic data in the first quarter of this year pushed the time frame further out from the original target of June. The one caveat from the prediction … the refinance share of mortgage applications will likely fall.
May 18, 2015
Home Builder Sentiment across the nation eased a bit in May, though builders still remain optimistic. Consumers have expressed some concerns regarding their financial conditions and would like to be on more stable ground before purchasing a home. The National Association of Home Builders Housing Market Index fell two points in May to 54, below the 57 expected. The index is up nine points since the May 2014 reading of 45. Any number over 50 indicates that more builders view conditions as good rather than poor.
Gas prices at the pumps continue to rise as the spring and summer driving season is now underway. Prices have risen by 22 cents in the past three weeks as the national average price for a regular gallon of gasoline is now up to $2.80 as of Sunday. The increase has been due to a rise in oil prices and stronger demand. The survey from Lundberg said that prices are still 93 cents lower than a year ago. The highest prices were seen in Los Angeles, CA at $3.95, while Baton Rouge, LA had the lowest at $2.32.
A recent report out from Airlines for America reveled that summer airline travel is estimated to reach an all-time high this season due to a strengthening economy. It is estimated that nearly 22 million passengers will fly on U.S. airlines this summer, up nearly 5% from last year. The favored destinations: Canada, Mexico and the United Kingdom. The uptick in demand coupled with lower fuel costs will greatly add to the bottom lines of U.S. airlines companies.
May 15, 2015
U.S. economic data continues to stream in with mixed numbers, despite five years into a post recession period. The May Consumer Sentiment Index fell to 88.6 for the first of two readings this month and fell by the most in more than two years. Expectations were calling for a number of 96.0. A spokesman from the index said that the “decline was widespread among all age and income subgroups as well as all regions of the country.” Consumer Sentiment measures the overall health of the economy as determined by consumer opinion.
Manufacturing data from the New York State region came in weaker than expected in May though still improved slightly for New York manufacturers. The Empire State Index came in at 3.1, below the 4.5 that was expected. Within the report it showed that the employment component had a slight increase, while the future employment index fell by six points. The future general business conditions fell noticeably.