Pending Home Sales, Gas Prices

February 29, 2016

Monday – February 29

The National Association of REALTORS® (NAR) reported on Monday that Pending Home Sales in January fell 2.5% from December. The NAR said that winter storms in parts of the country coupled with overheated home prices were the reasons for the unexpected declines. Pending Home Sales, an indicator of future closed sales, are just 1.4% higher than January of 2015.
“While January’s blizzard possibly caused some of the pullback in the Northeast, the recent acceleration in home prices and minimal inventory throughout the country appears to be the primary obstacle holding back would-be buyers,” said Lawrence Yun, chief economist for the NAR.

Business activity in the Chicago region fell into contraction territory in February. Chicago PMI fell to 47.6 this month, below the 55.6 in January and below the 52.0 expected. Within the report it showed that new orders and production rates also declined. A reading below 50 signals contraction. When asked what impacts lower oil prices had on activity, 48% of the respondents said that lower prices were boosting business due to lower freight and transportation costs.

Gas prices at the pumps remained low over the weekend with the national average price at $1.74 for regular, up nearly 4 cents in the last week. A petroleum analyst said that the eight-month decline at the pump looks like it’s coming to an end. The highest price seen was $4.11 back in July of 2008. The drop in prices has come as oil prices have plunged due to a big surge in supplies of crude oil.

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GDP, G-20 Meeting, Consumer Sentiment

February 26, 2016

Friday – February 26

The Bureau of Economic Analysis reported on Friday that the second reading for fourth quarter Gross Domestic Product rose 1.0%, above the 0.4% expected and up from the initial reading of 0.7%. The gains were due in part to an uptick in inventory stockpiling. Within the report it showed that the consumer spending component rose 2%, below the 2.2% from the first reading, and was much weaker compared to spring and fall.

Investors are looking to the G-20 meeting in Shanghai this weekend in hopes that it will produce a plan to stimulate global growth, along with stable oil prices. The G-20 is a group of finance ministers and central bank governors from 19 of the world’s largest economies, and the European Union. The G-20 was formed in 1999 as a forum for member nations to discuss key issues related to the global economy.

Thomson Reuters University of Michigan’s Consumer Sentiment Index edged lower in February to 91.7 from the 92 recorded in January. The 91.7 was better than the 91 expected. The survey measures consumers’ attitudes toward current economic conditions and future expectations. The 91.7 this month is below the 95.4 in February 2015. Within the report it showed that current economic conditions rose slightly, while future expectations were slightly lower.

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Mortgage Rates, Durable Goods, Unemployment Benefits

February 25, 2016

Thursday – February 25

Mortgage rates edged lower in the latest week and now hover just above all-time lows. Freddie Mac reported that the 30-year fixed conventional mortgage rate fell to 3.62% this week with 0.6 in points and fees added on top of the rate. It is the lowest mortgage rate since February 2015. Sean Becketti, Freddie Mac’s chief economist, said lower rates are helping with affordability as tight housing supplies pushes home prices higher.

Orders for goods lasting more than three years jumped in January and marked their largest monthly gain since last spring, signaling that the manufacturing sector may be turning the corner to greener pastures. The Commerce Department reported that January Durable Goods Orders jumped by nearly 5%, well above the 2% expected. The big boost came from a 54.2% surge in civilian aircraft.

Americans filing for first-time unemployment benefits rose in the latest week, but continue to remain below levels associated with a strengthening labor market. Weekly Initial Jobless Claims rose by 10,000 to 272,000, just above the 270,000 expected. The four-week moving average of claims, which irons out seasonal abnormalities, fell 1,250 to 272,000 last week. It was the 51st week that first time claims remained below the 300,000 level, the longest spell since the early 1970s.

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New Home Sales in January Decline, Global Markets, Interest Rate Hikes this year?

February 24, 2016

Wednesday – February 24

The Commerce Department reports that New Home Sales in January declined 9.2% from December to an annual rate of 494,000 units versus the 523,000 expected. December’s rate of 544,000 had been the highest rate since the 545,000 in February of last year. Sales in the West were hit the hardest, declining a whopping 32% to a rate of 110,000, the lowest since July 2014. Rounding out the country, despite a big blizzard in the Northeast last month, sales were up 3.4%, while the Midwest fell nearly 6% and the South saw sales up 1.8%.

Global Bond markets are turning their attention to the risk of the U.K. leaving the European Union. The implications of a “Brexit” for the global economy may not be huge, but it just adds to the other negative geopolitical events. The news is weighing on the U.S. Stock markets. The closely watched S&P 500 is down 6% so far in 2016 as lower oil prices have also weighed on the equity markets along with the geopolitical events.

The controversy surrounding any interest rate hikes this year by the U.S. Federal Reserve became a bit more clouded this morning. Richmond Fed President Jeffrey Lacker said that the ongoing strength in the job markets could give justification for multiple interest rate hikes this year. Mr. Lacker’s views contrast to the Federal Funds Futures markets, which are not pricing in any interest rate hikes this year. The Fed Funds Rate is the benchmark interest rate, which is a short-term instrument that is controlled by the central bank.

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Existing Home Sales, Home Price Index, Consumer Confidence

February 23, 2016

Tuesday – February 23

The National Association of REALTORS ® reported on Tuesday that January Existing Homes Sales edged up 0.4% from December to an annual rate of 5.47 million units, above the 5.30 million expected: this was the highest level since July. In the past year, sales are up 11%, the largest year-over-year gain since the 16.3% annual rise in July 2013. Existing Home Sales is a measure of the selling rate of pre-owned single-family homes.

The Case Shiller 20-city Home Price Index rose 5.7% from the same period last year, inline with expectations. A spokesperson said that while home prices continue to rise, the pace is slowing a bit. From November to January, prices were up 0.8%. The big gains were seen in Portland, San Francisco and Denver. The ongoing positive signs from the labor markets are one of the reasons for making home affordability attractive to consumers, which is gradually pushing prices higher.

The Conference Board reported on Tuesday that Consumer Confidence hit a a seven-month low in February as the recent Stock market losses early in the year continues to weigh on the minds of Americans. Consumer Confidence fell to 92.2 this month, Below the 97.3 expected and down from the 97.8 recorded in January. “Consumers’ short-term outlook grew more pessimistic, with consumers expressing greater apprehension about business conditions, their personal financial situation, and to a lesser degree, labor market prospects,” said Lynn Franco, director of economic indicators at the board.

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Household Debt, Housing Inventory, U.S. Stock Markets

February 22, 2016

Monday – February 22

The Federal Reserve Bank of New York reported on Monday that aggregate household debt balances increased slightly in the fourth quarter of 2015. As of December 31, 2015, total household indebtedness was $12.12 trillion, a $51 billion (0.4%) increase from the third quarter of 2015. Overall household debt remains 4.4% below its 2008Q3 peak of $12.68 trillion. The bank went on to say that only 2.2% of home mortgage debt was at least 90 days delinquent as of December 31, 2015, compared to 3.4% of auto loans, 7.7% of credit card debt and 11.5% of student loan debt.

Fitch Ratings recently released a report that showed that housing inventory has not expanded as much from the Great Recession as it has in past recoveries. The December 2015 existing home inventory of 1.79 million (3.9 months of sales) was down 12.3% compared with November 2015 and was off 3.8% compared with December 2014 and down 3.8% versus December 2013. Fitch cites the lack of availability of better located lots suitable for the trade up market. Broad lot development has lagged as many land developers left the industry during the most recent down turn and those that remained were cautious or financially constrained.

U.S. Stock markets continue to push higher today after hitting the 2016 lows on February 11. Since that time, the closely watched S&P 500 has risen 5% since the low of 1,810 hit on February 11, trading at 1,943 today. Signs of stability in China along with rising oil prices are a few reasons for the recent rise in Stock prices. This week economic data will cover a large portion of the U.S. economy as investors will gauge the health of the economy.

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CPI, Wal-mart, Gas Prices

February 19, 2016

Friday – February 19

The January Consumer Price Index (CPI) was unchanged versus the -0.1% expected, while the Core CPI, which strips out food and energy, rose 0.3%, the largest gain since August 2011. Year-over-year, Core CPI rose by 2.2%, the largest rise since June 2012 due to rising rents and higher medical costs. The Consumer Price Index measures changes in prices paid by consumers for a representative basket of goods and services.

Retail giant Wal-Mart reported earnings that beat expectations this week, but total revenue for 2016 declined by nearly 1%, due in part to the strong U.S. dollar. The company said that total revenues fell, but here in the U.S., revenues were up 3.6% from the previous year. To give an idea as to the size of Wal-Mart, it employs 2.2 million people around the globe, has 4,600 U.S. stores, which occupies 700 million square feet. The company had total revenues in of $482.1 billion, with costs and expenses at $458 billion. That’s a nice profit.

Consumers continue to feel relief at the gas pumps as prices have declined on a weekly basis for many months. The drop in oil prices due to oversupply is the big reason behind the decline. The national average price for a regular gallon of gas fell to $1.72, down from $2.27 a year ago. The highest average prices are seen in Hawaii at $2.61, with the lowest being in Oklahoma and Missouri at $1.41.

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Mortgage Rates, Weekly Initial Jobless Claims, Fed Minutes

February 18, 2016

Thursday – February 18

Mortgage rates remained just above all-time lows in the latest week due to uncertainty surrounding the the U.S. economy along with Stock market volatility. Freddie Mac reports that the 30-year fixed-rate mortgage was unchanged this week at 3.65% with 0.5 added on top in points and fees. Mortgage rates should remain low this year as the Fed continues to purchase Mortgage Backed Securities in an effort to keep rates low.

In economic news, the February Philly Fed came in at -2.8%, in line with expectations as the sector continues to be battered by the strong dollar, weak overseas demand and falling commodity prices. Weekly Initial Jobless Claims fell 7K to 262K in the latest week. Econmic data has been on the soft side so far this year as the economy muddles along.

The Fed Minutes from the January meeting were released yesterday and showed that that uncertainty had increased since officials met in December, though there were no major headlines. There will most likely not be a Fed rate hike for the rest of 2016, unless some surprising strong economic data gets released.

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Housing Starts, Wholesale Inflation, Economic Growth

February 17, 2016

Wednesday – February 17

The Commerce Department reported that January Housing Starts fell 3.8% from December to an annual rate of 1.099 million units versus the 1.171 million expected, a three-month low. All four major regions across the country saw declines in starts, while a big East Coast snowstorm caused a halt in some late month construction in that area. January Building Permits, a sign of future construction, fell 0.2% from December to 1.202 million units, just above the 1.200 million expected, while December was revised lower to 1.204 million from 1.232 million.

Wholesale inflation, as measured by the Producer Price Index (PPI), rose 0.1% in January, above the -0.2% expected and above the -0.2% recorded in December. On an annual basis, PPI decreased 0.2% after declining 1.0% in December. However, Core PPI, which strips out volatile food and energy, surged 0.4%, well above the 0.0% expected and up 0.8% annually. The one month jump in Core prices does not constitute a pattern and the Fed will more closely watch the Consumer Price Index releasing on Friday. Inflation overall remains tepid with no threat of gathering speed at this time.

Economic growth appears to have slowed in late 2015 and at the start of 2016, perhaps foreshadowing another year of potentially unspectacular economic growth, according to Fannie Mae’s Economic & Strategic Research Group’s February 2016 Economic and Housing Outlook. On the housing front, home price gains are likely to outpace household income growth as the year continues. However, the rise in home prices should help lift underwater mortgages and create a healthier housing market.

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Home builders, Manufacturing Sector, Oil Prices

February 16, 2016

Tuesday – February 16

Home builder sentiment slipped a bit in February due to the high costs and lack of availability of lots and labor, though the reading still remains positive. The National Association of Home Builders Housing Market Index fell three points to 58 in February, below the 60 expected and down from 60 in January. Any number over 50 indicates that more builders view conditions as good than poor. Builders have expressed optimism that sales will pick up in the coming months.

The manufacturing sector continues to underperform the rest of the economy due to a stronger dollar, which makes goods pricier along with weak demand from overseas. The Empire State Manufacturing Index has come in at -16.64 in February, well below the -9.9 expected, but above the -19.4 registered in January. This was the seventh straight month of contractions. Within the report it showed that the number of employee’ index improved, though overall employment remained relatively the same.

Oil prices continue to drift lower, despite a proposed freeze in production from Russia, Saudi Arabia, Qatar and Venezuela. Oil prices have sunk 70% since June 2014 due to oversupply and lower demand. The price of West Texas Intermediate fell to $28/barrel in New York trading. A freeze in production is unlikely, says oil analyst Tom Kloza of the Oil Price Information Service. “People recognize that getting those four parties together and actually having a production freeze is a little bit like getting Johnny Manziel and Charlie Sheen to pledge to live very, very clean lives for the next few years,” said Kloza.

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