May 31, 2016
Home price gains remained steady in March due in part to a limited supply of homes on the market. The S&P Case-Shiller 20-city Home Price Index rose 5.4% this March from March 2015. From February to March, prices rose 0.9%. The S&P Case Shiller National Home Price Index was up a solid 5.2% from the previous March. A spokesperson from the index said, “The economy is supporting the price increases with improving labor markets, falling unemployment rates and extremely low mortgage rates.
Consumer Confidence slipped in May after declining in April as Americans felt that current conditions were less favorable in May than in April. The Consumer Confidence Index fell to 92.6 in May, down from the 94.7 in April and below the 96.2 expected. The index measures consumer attitudes, sentiment towards business conditions, short-term outlook, personal finances and jobs. The employment component said 24.4% of respondents said jobs were hard to get, up from 22.8% in April.
The Fed’s favorite inflation gauge, the Core Personal Consumption Expenditure (PCE), rose 0.2% in April, in line with expectations, while year-over-year rose 1.6%, in line and matching the March number. Consumers opened their wallets in April as Personal Spending rose 1% versus 0.7% expected, the fastest pace in nearly seven years. Consumer spending accounts for more than two-thirds of economic output in the U.S.
May 27, 2016
The Bureau of Economic Analysis reported on Friday that the second reading for first quarter 2016 Gross Domestic Product (GDP) rose 0.8% versus the 0.9% expected and up from the first reading of 0.5%. The number is still anemic, though the Atlanta Fed Bank has the second quarter GDP forecast rising 2.9%.
Within the report it showed that consumer spending, a big driver of the U.S. economy, was up 1.9%, unchanged from the first reading but down from the 2.4% recorded in Q4 2015. GDP is the monetary value of all the finished goods and services produced within a country’s borders in a specific time period. It is considered the broadest measure of economic activity.
The unofficial kickoff to summer begins this Memorial Day weekend as Americans flock to their favorite beaches, camping grounds or neighborhood cookouts. Nearly three-fourths of American grill owners fire up the grill on Memorial Day. The menu in order will include hamburgers, steak, hot dogs and chicken. Side dishes in order consist of corn, potatoes and other vegetables. There is no definitive history about how the word “barbecue” originated, or why it’s sometimes used as a noun, verb or adjective. Some say the Spaniards get the credit for the word, derived from their “barbacoa” which is an American-Indian word for the framework of green wood on which foods were placed for cooking over hot coals.
May 26, 2016
Signed contracts to purchase existing homes soared in April from March, as the housing sector continues to field positive news. April Pending Home Sales jumped 5.1% from the previous month hitting the highest level in 10 years. Estimates were calling for a meager 0.6% gain. The index is up 4.6% from April of 2015. “The ability to sign a contract on a home is slightly exceeding expectations this spring even with the affordability stresses and inventory squeezes affecting buyers in a number of markets,” said Lawrence Yun, the National Association of REALTORS®’ chief economist in a release.
Orders placed for goods lasting more than three years, such as washers and dryers, surged in April, reported the Commerce Department on Thursday. The Durable Goods Orders Index rose 3.4% from March to April, well above the 0.6% rise expected. The big driver in the index was a near 65% increase in civilian-aircraft orders. This increase of 3.4% is up three of the last four months, following a 1.9% March increase.
Mortgage rates edged higher this week, though still remain just above the all-time lows. Last week, the Federal Reserve Bank of the U.S. painted a more hawkish picture for future interest rates, meaning that they could move higher sooner, rather than later. Freddie Mac reported that the 30-year fixed conventional mortgage rate ($417,000 or less) rose to 3.64% this week from 3.58% last week. To obtain that rate, a potential borrower would have to pay 0.5 in points and fees. Freddie Mac said that mortgage rates in May saw the lowest monthly average in nearly three years.
May 25, 2016
The Federal Reserve Bank of New York reports that mortgage debt that Americans owe to lenders is at the highest levels in four years during the first quarter of 2016. Total nationwide mortgage debt rose $120 billion from the fourth quarter of 2015 to the first quarter of 2016, for a total of $8.37 trillion.
Overall housing debt, which includes home equity lines of credit (HELOC), is now at $8.85 billion. When taking into account mortgage debt, HELOCs, student, auto and credit card debt, the sum total is $12.25 trillion. The Federal Reserve Bank of New York’s Household Debt and Credit Report provides unique data and insight into the credit conditions and activity of U.S. consumers.
Mortgage application volume rose in the latest week as would-be borrowers continue to take advantage of the low interest rate environment. The Mortgage Bankers Association (MBA) reports that its Market Composite Index, a measure of total mortgage application volume, rose by 2.3% in the latest week, while the refinance index edged higher by 0.4%. The big push came from the purchase index, rising 5%. An MBA spokesperson said, “Purchase applications got back on track last week, resuming the level of activity observed throughout most of April and May.”
May 24, 2016
The Commerce Department reported that New Home Sales surged by nearly 17% in April to an annual rate of 619,000, well above the 521,000 expected. The 619,000 was up from the 531,000 in March, which was revised higher from 511,000. New Home Sales are now at the highest level since January 2008, and April was the largest monthly percentage increase in 24 years. Sales were up almost 24% from April 2015. The New Home Sales report shows the number of newly constructed homes with a committed sale during the month.
According to a Pew Research Center Analysis of U.S. Census Bureau, in 2014, Americans aged 18 to 34 years old were more likely to be living in their parents’ homes than with a spouse or partner. This is the first time this has occurred in the US. in more than 130 years. To break it down by further, young men are more likely to be living with parents than females … 35% for men, 29% for women. One noted authority on the subject says that it is an “increasing acceptance that it takes longer to grow up than it used to.”
With Memorial Day weekend upon us, Americans will hit their favorite beach, campground or national park with friends and family and may partake in adult beverages. A recent study showed that global alcohol sales have declined for the first time in 15 years, with one exception, the U.S. And where it is just a small decline, it is the first time sales have declined since having consistently climbed every year since 2001, reports research firm Euromonitor International. One of the biggest reasons was not a change of taste, but it is due to economic reasons.
May 23, 2016
Freddie Mac reported last week that despite low mortgage rates, rapidly rising house prices and tight inventory make affordability and availability major challenges for would-be homebuyers. In the latest Freddie Mac House Price Index it revealed that first quarter 2016 house price appreciation grew by 1.4%. Over the past 12 months, prices have increased 5.8% nationally. Freddie Mac went on to say that home prices are forecasted to rise by 4.8% in 2016 and 3/5% in 2017.
Outspoken St. Louis Fed President James Bullard said today the he sees the tight labor market putting upward pressure on inflation, which is laying the case for a hike in the benchmark Fed Funds Rate in June or July. Mr. Bullard said that the rise in rates will still be dependent upon incoming economic data in its determination as to when the U.S. economy may be ready for the benchmark Fed Funds Rate to begin rising. A rate hike will be determined by an improvement in the economy, further strengthening of the labor markets and evidence that inflation is moving towards its target rate of 2%.
Despite the recent rise in gas prices, motorists will be looking at the lowest prices in 11 years when they take to the roads this Memorial Day weekend. This Memorial Day weekend, it is estimated that 34 million Americans are planning a road trip to their favorite destinations. The national average price for a regular gallon of gasoline is $2.28, which is below the $2.74 seen last year this time. A AAA spokesperson said, “Gasoline demand continues to test record levels, and a repeat of last year’s higher-than-normal summer driving season is likely on the horizon.”
May 20, 2016
CoreLogic reports that the share of homes purchased with cash in the first two months of the year hit an eight-year low from the same time period in 2008. For the first two months of 2016, cash sales averaged 35.6% of total home sales. Cash sales were 25% before the housing crisis and peaked in 2011 at 47%. The report went on to reveal that real estate-owned sales made up the largest cash sales at 59.2%, resales at 35.6%, short sales at 32.6%, while newly constructed homes were 15.2%
The housing sector continues to be a bright spot in the U.S. economy given low home loan rates along with modest seasonal inventory gains. The National Association of REALTORS® reported today that April Existing Home Sales rose 1.7% from March, the second monthly gain in a row. A surge in the Midwest and a modest gain in the Northeast offset smaller declines in the South and West. Sales rose to an annual clip of 5.45 million units in April, above the 5.40 million expected and up from the 5.36 million recorded in March. Existing Home Sales measure both the number and prices of existing single-family homes, condos and co-op sales over a one-month period.
Memorial Day weekend forecast statistics are hitting the wires ahead of the holiday weekend which begins on May 27. There are expected to be 38 million Americans hitting the roads or flying for the three-day weekend. Of the 38 million, 89% or 34 million will hit the road, up 2.1% from last year. Those travelling by air is expected to be 7% of the 38 million or 2.6 million, a 1.6% inrease. Those using alternate methods of transportaion, such as cruises, trains and buses will be 1.6 million, a 2.3% decline.
May 18, 2016
Government-sponsored-entity Fannie Mae reported this week that it sees lower economic growth forecasts for 2016 falling to an annual growth rate of 1.7%, down from 1.9% growth in the prior forecast and 2.2% at the start of the year. Fannie did say that the economic landscape is improving, but “it will not be sufficient enough to overcome the damage done during the first quarter of the year.” In the housing sector, Fannie Mae feels that 30-year fixed mortgage rates will be near the 3.70% range in the fourth quarter of 2016. As far as total mortgage originations, Fannie Mae expects a 3.7% decline in 2016 from 2015 to $1.65 trillion.
Despite it being the height of the spring buying season and mortgage rates at three-year lows, mortgage application volume fell in the latest week. The Mortgage Bankers Association (MBA) reports that its Market Composite Index, a measure of total mortgage loan application volume, fell 1.6% for the week ended May 13, 2016. Within the report it revealed that the refinance index increased increased 1%, while the purchase index fell 6% from the previous week. The MBA also reported that the average rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) remained at 3.82%.
With Memorial Day weekend fast approaching, drivers will take to the roads to hit the beach, favorite camping ground or local parks to enjoy a day or weekend out with family and friends. Ahead of the weekend, gas prices have moved to their highest level of 2016. The national average price for a regular gallon of gasoline rose to $2.24, above the $2.11 a month ago, though below the $2.70 recorded a year ago. The highest price recorded here in the states was $4.11, hit back in July of 2008.
May 17, 2016
April Housing Starts jumped 6.6% from March to an annual rate of 1.17 million units versus the 1.128 million units expected. However, the April Housing Starts rate was 1.7% below the April 2015 number of 1.192 million. Building Permits, a sign of future construction, rose 3.6% to an annual rate of 1.11 million, below the 1.13 million expected. The better-than-expected numbers signal that the economy could be reigniting in the second quarter.
The April Consumer Price Index (CPI) rose at its fastest rate since February 2013, rising 0.4% versus the 0.3% expected, due to higher gasoline prices and rising rents. The Core CPI, which strips out volatile food and energy, rose 0.2% which was in line with expectations. Annually, CPI rose 1.1% from the 0.9% in March, while the Core rate was up 2.1% after the 2.2% increase in March. The Federal Reserve will be closely watching the inflation rate to determine whether or not to raise rates in June. Currently, traders are placing just an 11% chance of an interest rate hike at the June Federal Open Market Committee meeting.
Speaking at a conference in New York City this week, Mike Fratantoni, chief economist for the Mortgage Bankers Association, said that mortgage rates will hover near the 4% level for the next year. Mr. Fratantoni’s message comes despite the possibility of the Federal Reserve raising interest rates later in the year. Mortgage rates continued to be held low as the Federal Reserve conducts ongoing weekly purchases of Mortgage Backed Securities in an effort to spur on economic growth.
May 16, 2016
Home builder confidence in May remained steady, though there have been an increasing number of hurdles to jump. The National Association of Home Builders reports that its single-family Housing Market Index remained at 58 for four straight consecutive months. Any number over 50 indicates that more builders view condition as good rather than poor. Builders have said that despite sentiment remaining positive, they are facing an increasing number of regulations and lot supply constraints.
A recent report out of FNC, industry data provider, says first time home-buyers will struggle this spring buying season. FNC cites higher costs and limited inventory as two main issues for first-time homebuyers. Home prices in April rose to $231,000, a 7.4% increase from last year. Home prices could eclipse what we saw in the 2006 and 2007 peak levels by as early as this summer. First-time homebuyers make up about 30% of total homebuyers.
The manufacturing sector took a hit today as the May Empire State Index fell 9.02, well below the +6.2 expected and well below the +9.6recorded in April. The key components of the index were mostly weak. The sector was looking for a rebound given the recent decline in the dollar. Manufacturing took a big hit in 2015 as the U.S. dollar strengthened against many global currencies. When the U.S. dollar is higher, it costs more for foreign countries to purchase our products.