April 29, 2016
Inflation met tame expectations in March as the Core Personal Consumption Expenditures (PCE) rose an anemic 0.1%, down from the 0.2% in February. Year-over-year Core PCE rose 1.6%, as expected and below the February reading of 1.7%. The Core PCE is the favored inflation gauge for the Fed. In the absence of inflation pressures, a not-so-strong economy in the U.S., a weak global economy and the 2016 election, the Fed may not be in any rush to raise rates anytime soon. The core PCE price index measures the prices paid by consumers for goods and services without the volatility caused by movements in food and energy prices to reveal underlying inflation trends.
The U.S. dollar index continues its slide lower now hovering near 93.0, an 11-month low, signaling the Fed is on hold with interest rates. Higher interest rates in a country generally increases the value of that country’s currency relative to nations offering lower interest rates and vice versa. The odds of an interest rate hike in June has fallen to a measly 12%. The weak dollar has also helped fuel the rise in oil prices.
Consumer attitudes declined in April due to bleaker prospects on the U.S. economy. The Consumer Sentiment Index fell to 89 in April, below the 91 recorded in March. However, a spokesperson for the index said that the gloomy outlook could be due in part to the presidential campaign and that the decline is far short of indicating a recession. Consumers’ current views were more optimistic.
April 28, 2016
The Bureau of Economic Analysis reported today that first quarter 2016 Gross Domestic Product (GDP) rose by an anemic 0.5% versus the 0.9% expected and down from the 1.4% in the final quarter of 2015. It was the lowest first quarter reading since 2014. In addition, GDP showed exports fell by 2.6%. Consumer spending rose 1.8%, with much of that on utilities and health care. The GDP report had a bit of bad news for everyone. The Core Personal Consumption Expenditures inflation rate inside GDP, which excludes food and energy, rose 2.1% in the first quarter, up from the 1.3% rise in the previous quarter.
Homeownership rates fell to their third lowest on record in the first quarter of 2016, signaling deteriorating finances, higher qualifications and changing preferences since the Great Recession. The Commerce Department reported that the U.S. homeownership rate fell to 63.6 in the first quarter of 2016. Homeownership rates were the highest in the Midwest (53.9%) and the lowest in the West (58.7%). The homeownership rate for those aged 35 or younger fell to 34.2%, compared to 34.7% in the fourth quarter of 2015 and 34.6% in the first quarter of 2015.
Mortgage rates edged higher in the latest week as Bond prices fell, while yields edged higher. Freddie Mac reported that the average rate for a 30-year fixed conventional mortgage ($417,000 or less) rose to 3.66% from the previous rate of 3.59%. The rate comes with 0.6 in points and fees added on top of 3.66%. Mortgage rates continue to run just above all-time lows as the Federal Reserve continues on its quest to keep rates low to spur on the economy.
April 27, 2016
After a weak reading for New Home Sales earlier in the week, signed real estate contracts for existing single-family homes, condos and co-ops rose in March for the second consecutive monthly gain. The National Association of REALTORS® (NAR) reported that Pending Home Sales increased 1.4% last month to the highest level in nearly a year. A spokesperson from the NAR said, despite supply deficiencies in plenty of areas, contract activity was fairly strong in a majority of markets in March.
Shares of Apple are falling in today’s trading after the maker of the popular iPhone reported quarterly earnings that missed estimates across the board. The company said that sales of iPhones sank for the first time ever in the latest quarter. Apple also reported that both revenues and earnings fell last quarter, which is a rare occurrence. The company posted record cash on hand and will use that extra cash to buy back shares, while increasing its quarterly dividend to 57 cents per share.
Mortgage application activity declined in the latest week, this despite the spring buying season being in full bloom. The Mortgage Bankers Association’s (MBA) Market Composite Index, a measure of total mortgage loan application volume, fell 4.1% in the latest week. The refinance index fell 5%, while the purchase index decreased 2%. The MBA went on to report that home loan rates edged higher this week to 3.85% from 3.83%, the seconfd straight weekly increase.
April 27, 2016
Home price gains continued in February, though moderation has been seen in some regions. The February Case-Shiller 20-city Home Price Index rose 5.4% from February 2015, below the 5.6% expected. A spokesperson said, “Home prices continue to rise twice as fast as inflation, but the pace is easing off in the most recent numbers.” The National Home Price Index rose 5.3% year-over-year. However, rising prices and the pace of single-family construction pose a concern throughout the nation.
The Conference Board reported on Tuesday that consumer attitudes towards current economic conditions slipped in April after the gains seen in March. The Consumer Confidence Index slid to 94.2 this month, from the 96.1 recorded in March and below the 96.7 expected. Consumers’ appraisals of the labor market were also mixed. Those claiming jobs are “plentiful” decreased, while those claiming jobs are “hard to get” also declined.
Consumer purchases of long-lasting manufactured goods rose less than expected in March, signaling the sector still continues to drag its feet. U.S. durable orders rose 0.8% last month, below the 1.8% gain expected and after the 3.1% decline in February. The manufacturing sector continues to struggle with a stronger dollar with sluggish demand from overseas. Civilian aircraft orders and orders for motor vehicle parts decreased along with declines for computers, electronic products and appliances.
April 25, 2016
A sharp decline in the West sent New Home Sales lower in March. Across the country, sales in the East were unchanged, while sales rose in the Midwest and the South. The Commerce Department reported that March New Home sales fell 1.5% from February to an annual rate of 511,000, below the 521,000 expected. Sales were up 5.4% from March 2015 to March 2016. The New Home Sales report shows the number of newly constructed homes with a committed sale during the month.
The Federal Open Market Committee (FOMC) meeting will take place this week on Tuesday and will end on Wednesday with the 2:00 p.m. ET release of its monetary policy statement. The Fed members will discuss the U.S. economic landscape as well as the economic woes that continue to plague global economies. The highly anticipated meeting will garner much of the attention this week as global investors look to the Federal Reserve for any clues as to when the central bank may raise rates again. There is a near zero percent chance of an interest rate hike at this week’s meeting.
Freddie Mac reported on Friday that housing in 2016 is expected to maintain its momentum throughout the year and it expects housing to be an engine of growth. Freddie Mac said construction activity will pick up as we enter the spring and summer months, and rising home values will bolster consumer confidence and help support renewed confidence in the remaining months of this year. In addition, continued prolonged low mortgage rates will also support both the housing and mortgage markets in 2016.
April 22, 2016
U.S. investors withdrew $4.5 billion from U.S.-based Stock funds in the latest week, despite the 1% gain in market value over that time period, reports mutual and hedge fund data company Lipper, Inc. So far in 2016, investors have withdrawn $51 billion with just three weeks this year during which funds attracted more than investors withdrew.
Mortgage delinquency rates continue to improve across the U.S. since the housing bubble burst back in early 2008. Black Knight Financial Services reports that in March, the rate of 30-day delinquencies was the lowest since just before 2000 at 1.95% when Black Knight started compiling the data. In addition, the overall home loan delinquency rate, which tracks loans which are 30 or more days past due but not yet in foreclosure, fell to 4.08% in March, the lowest since March 2007.
The regularly scheduled two-day Federal Open Market Committee meeting will kick-off next week on Tuesday with the monetary policy statement being released on Wednesday at 2:00 p.m. ET. There will be no post-statement news conference by Fed Chair Yellen, nor will there be any forecasts associated with the release. Currently Fed Fund Futures show almost a zero percent chance of a hike at the meeting, while June shows just a 21% chance of a hike. Fed Fund Futures now show a 63% chance of a Fed move by December, up from about 50% forecasted at the end of last week.
April 21, 2016
RealtyTrac®, the nation’s leading source for comprehensive housing data, reported this week that home sellers in March on average sold for $30,500 more than they purchased for, a 17% average gain in price. The 17% was the highest average price gain for home sellers since December 2007. “Home sellers in many markets are now seeing average price gains close to or above what home sellers experienced during the last housing boom,” said Daren Blomquist, senior vice president at RealtyTrac®. After a positive reading in March, regional manufacturing in the Philadelphia region took a hit in April as the sector continues to struggle with the headwinds of a strong dollar coupled with weak overseas demand. The Philadelphia Fed Index fell by 14 points to -1.6, below the 9.9 expected. March saw the first positive reading in seven months. The components of the index were also weak; the new orders index was at zero, while the gauge of workers declined to -18.5. Americans filing for first-time unemployment fell to 42-year lows in the latest week as the sector continues to churn out positive news. Weekly Initial Jobless Claims declined 6,000 in the latest week to 247,000, below the 263,000 expected. The drop in claims comes despite somewhat weak economic growth, while wage growth has been stalling. The report measures the number of people who are filing or have filed to receive first-time unemployment insurance benefits, as reported weekly by the U.S. Department of Labor.
April 20, 2016
The National Association of REALTORS® reported on Wednesday that March Existing Home Sales jumped 5.1% from February’s decline to an annual rate of 5.33 million units, just above the 5.30 million expected. Sales rose in all four regions of the country. Existing Home Sales also are up 1.5% from a year ago. The median home price in March was $222,700, up 5.7% from March of 2015. March showed 4.5 months’ worth of current inventories; a six-month supply is viewed as normal. Existing Home Sales measure both the number and prices of existing single-family homes, condos and co-op sales over a one-month period.
The Mortgage Bankers Association reports that its Market Composite Index, a measure of total mortgage application volume, rose 1.3% in the latest week as mortgage rates continue to hover near 52-week lows. The index is at a nine-week high. Within the report it showed that the refinance index was up 3%, while the purchase index fell 1%. The MBA also reported that the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) moved higher to 3.83% from 3.82%.
Tech giant Intel announced today that it will be eliminating 12,000 workers, or 11% of its workforce by 2017. The company said that the slowing Personal Computer (PC) market is behind the cuts. Intel does have concerns in the PC sector, but it feels that the PCs will continue to transform. Another sticking point was slow growth in China, which is the largest part of the weakness. Intel plans to focus on growth areas like its data center business.
April 19, 2016
The U.S. Census Bureau and the Department of Housing and Urban Development reported on Tuesday that Housing Starts declined 8.8% in March from February to an annual rate of 1.089 million units, below the 1.170 million expected. In addition, single family Housing Starts fell 9.2% in March from February, while multi-family dwellings fell 8.5%.
Despite the decline, Housing Starts were 14.2% higher compared to a year ago. The Northeast was the only region in which starts rose in March. Rounding out the report it showed that Building Permits, a sign of future construction, declined by 7.7%, hitting a 12-month low of 1.09 million units.
Gas prices across the nation continue to edge higher now that the spring and summer driving seasons are upon us. With increased demand for gasoline and the switch to more costy refining for gasoline in the spring and summer, prices tend to rise at this time of the year. The national average price for a regular gallon of gasoline is $2.11, up from $1.98 a month ago and up $0.06 in the past week. Gas prices are up 45 out of the past 55 days for a total of 41 cents per gallon. Despite the recent increases, pump prices are down 33 cents per gallon compared to this same date last year.
April 18, 2016
The National Association of Home Builders reported on Monday that its Housing Market Index remained steady at 58 in April, matching the March reading. The report measures builder confidence for newly-built single-family homes. Within the report it showed that sales expectations in the next six months rose one point to 62, and the index gauging buyer traffic also increased a single point to 44. Meanwhile, the component charting current sales conditions fell two points to 63.
The major oil producing nations’ proposed oil production freeze fell apart yesterday when Saudi Arabia demanded that Iran join the talks, despite Iran’s assertions that it will not do so until it had reached pre-sanctions levels of output. Oil prices are lower, but off the worst levels as an oil-workers’ strike in Kuwait is providing some support. WTI oil is currently down $1.12 to $39.22/barrel.
Saudi Arabia told the U.S. that if a bill in Congress is passed holding Saudi Arabia responsible for its role in the 9/11 attacks, the oil rich nation would sell off its $750 billion worth of American assets. The Obama administration has lobbied to block the passage of the bill. This story is not grabbing many headlines at the moment, but it likely will if tensions rise further.