September 29, 2016
The final reading for second quarter 2016 Gross Domestic Product rose by a dismal 1.4% from the 1.1% that was reported previously. The 1.4% compares to 2.6% in the comparable period in 2015. ThE 2.4% is up from the 0.8% in the first quarter of this year, but below the 2% annual growth rate averaged since the recession ended in mid-2009. Within the report it showed that business investment improved, while consumer spending rose 4.3%.
The National Association of REALTORS® reported on Thursday that Pending Home Sales in August fell 2.4% from July to their lowest level since January. The -2.4% was below the 1% expected as sales cooled in August for the third time in four months. Across the nation, sales rose 1.3% in the Northeast, decreased 0.9% in the Midwest, were down 3.2% in the South and were lower by 5.3% in the West. Pending Home Sales measures housing contract activity based on signed real estate contracts for existing single-family homes, condos and co-ops. A signed contract is not counted as a sale until the transaction closes.
Mortgage rates declined in the latest week as they hover just above all-time lows, falling to a 10-week low. The slight decrease came after the U.S. Federal Reserve Bank decided not to raise interest rates at the September 21 meeting. The 30-year fixed mortgage rate fell to 3.42% this week from 3.48% with 0.5 in points and fees. Last year in the same week, the rate was 3.85%. Low mortgage rates have fueled the sector in the past eight years after the housing bubble imploded back in 2008.
September 28, 2016
Wells Fargo CEO and Chairman John Stumpf will forfeit $41 million in unvested equity and temporarily forgo his salary as the company launches an investigation in the retail banking unit. The bank was hit with $185 million in penalties for opening fee-generated accounts without the knowledge of customers. The bank fired 5,300 employees who were involved in the scandal.
Cash sales for homes continued to decline in June and have fallen to less than 30% for the first time since the housing crisis began, according to analytics firm CoreLogic. Cash sales peaked at nearly 44% in January of 2011, while before the crisis began in late 2008, cash sales averaged 25% of market sales. From June 2015 to June 2016, cash sales fell 2.5%, down 0.9% from May to June. At the current rate, cash sales could average 25% by mid-2018.
Mortgage application volume fell in the latest week from one week earlier, but are higher than a year ago. The Mortgage Bankers Association reports that its Market Composite Index, a measure of total mortgage application volume, fell 0.7% after the 7.3% decline in the previous week. The refinance index declined 8%, but increased 34% from a year ago, while the purchase index rose 1% and is up 10% from the same week a year ago. The MBA report that the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) decreased to 3.66% from 3.70%, with points decreasing to 0.33 from 0.38. For jumbo loans, the average contract interest rate for 30-year fixed-rate mortgages (greater than $417,000) increased to 3.69% from 3.64%, with points decreasing to 0.29 from 0.36.
September 27, 2016
The Conference Board reported on Tuesday that its Consumer Confidence Index soared to 104.1 in September, the highest level since before the recession began in 2008. A Conference Board spokesperson said, “ Consumers are more upbeat about the short-term employment outlook, but somewhat neutral about business conditions and income prospects.” Within the report there were positive readings on describing jobs as “plentiful,” while consumers felt that business conditions are good. The proportion expecting more jobs in the months ahead increased from 14.4% to 15.1%, while those anticipating fewer jobs declined from 17.5% to 17.0%.
Home price gains remained steady in July as the sector continues to shine in a somewhat gray economy. The S&P/Case/Shiller 20-city Index rose 5.0% from July 2015 to July 2016. Low mortgage rates continue to fuel the housing sector, while the improving job market has also been a factor. Across the nation, prices rose 12.4% in Portland, +9.4% in Denver, +1.7% in New York, +3.7% in Chicago and +5.5% in Los Angeles.
Oil prices declined in Tuesday’s trading after Saudi Arabia and Iran dashed hopes for a production cut by the OPEC (Organization of the Petroleum Exporting Countries). OPEC members feel that a deal to posiibly cut production may not come until the formal OPEC meting in November. West Texas Intermediate oil fell to $44.33 a barrel in New York trading. That is down from the $50 seen at the end of June.
September 26, 2016
The Commerce Department reported on Monday that New Home Sales in August fell 7.6% from July to an annual rate of 609,000, which beat expectations of 585,000. Sales plunged 34% in the Northeast, fell 2.4% in the Midwest, dropped 1.3% in the South, but increased 8% in the West. Supply was running at 4.6 months in August, up from the 4.2% months in July. From August 2015 through August 2016, sales rose a whopping 20.6%. The median home price also dropped, falling 5.4% from a year ago to 284,000.
The problems at banking giant Wells Fargo continued on Monday after former employee, who say they were fired for following the law, filed a class action lawsuit against the bank seeking $2.6 billion in damages. The lawsuit was filed by those employees who didn’t break the law and were let go by the bank for not fulfilling outrageous sales quotas. The lawsuit states that the lofty sales goals were “unrealistic,” “impossible” and “unreachable.”
The first presidential debate between Democratic candidate Hillary Clinton and her Republican challenger Donald Trump will air on Monday night beginning at 9:00 p.m. ET from Hofstra University in Long Island, New York. It is estimated that some 100 million Americans will tune in Monday night. Ms. Clinton is said to be clinging to a narrow lead in the polls with the debate being a possible tipping post for a path to the presidency. Tonight’s debate is the first of three with the topics being “America’s Direction,” “Achieving Prosperity” and “Securing America.”
September 23, 2016
Mortgage rates continued to hover just above record lows this week, and the low rates have helped the refinancing end of the spectrum remained high. Freddie Mac reported that the 30-year fixed conventional mortgage rate ($417,000 or less), edged lower to 3.48% from 3.50% with 0.6 in points and fees. Last year this time the 30-year fixed was 3.90%. Low rates have fueled the housing market for the past six years, after the housing bubble burst back in 2008 and early 2009.
With the holiday shopping season right around the corner, retailers are gearing up for what they hope will be a banner season for sales. Outplacement firm Challenger, Gray & Christmas reports that retailers will hire 700,000 seasonal positions this season, below the 739,000 that were hired last year. This year, the average hourly wage for seasonal workers is expected to be around $14, up from $10 last year. The seasonal hiring will begin earlier than usual this year, due to competition for shoppers’ dollars and the promotions that begin earlier every year.
Halloween spending is expected to hit its highest level according to a survey conducted by the National Retail Federation. Consumers are expected to shell out a record $8.4 billion this year for an average of $82.93 per shopper, up from $74.34 last year, with 171 million Americans planning to revel in festivities this year. According to the survey, consumers plan to spend $3.1 billion on costumes, $2.5 billion on candy, $2.4 billion on decorations and $390 million on greeting cards.
September 22, 2016
The National Association of REALTORS® (NAR) reported on Thursday that August Existing Home Sales fell 0.9% from July to an annual rate of 5.33 million units, below the 5.50 million expected. The NAR said that despite low mortgage rates, higher prices and low inventories kept buyers on the sidelines. Sales were up 0.8% from August 2015. Lawrence Yun, NAR chief economist, said, “Hopes of a meaningful sales breakthrough as a result of this summer’s historically low mortgage rates failed to materialize because supply and affordability restrictions continue to keep too many would-be buyers on the sidelines.” Home prices continued to rise across the country in July. The Federal Housing Finance Agency (FHFA) reported that home prices rose 0.5% from June according to its Home Price Index . From July 2015 to July 2016, prices were up 5.8%. The FHFA monthly HPI is calculated using home sales price information from mortgages sold to, or guaranteed by, Fannie Mae and Freddie Mac.
The Federal Reserve left its benchmark short-term Fed Funds Rate rate unchanged at the 0.25 – 0.50 range yesterday, but left the door open for a rate hike this year. If the Fed were to raise rates, it would most likely come at the December Federal Open Market Committee meeting. The vote was 7-3 with the three dissenters wanting to edge the Fed Funds Rate higher by a quarter percent. The statement read that job gains have been solid, household spending has been growing strongly, however, business investments have remained soft. In addition, inflation continues to run below the Fed’s 2% objective, while the Federal Funds Rate is likely to remain, for some time, below levels that are expected to prevail in the longer run.
September 21, 2016
The Mortgage Bankers Association (MBA) reported on Wednesday that its Market Composite Index, a measure of total mortgage loan application volume, fell 7.3% in the latest week as mortgage rates edged higher. In addition, the refinance index declined 8%, while the purchase index decreased 9%. The MBA also said that the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) rose to 3.70% from 3.67%, with points increasing to 0.38 from 0.36 (including the origination fee) for 80% loan-to-value (LTV) ratio loans.
The two-day Federal Open Market Committee meeting concludes on Wednesday afternoon with the monetary policy statement being delivered at 2:00 p.m. ET. The consensus points to a “hawkish hold” where the Fed will maintain the short-term Fed Funds Rate at the 0.375% level, but may state that rates will rise in December. There is little chance of a hike at the November FOMC meeting given the presidential election. Weak economic data in the past month along with slow growth and subdued inflation should keep the Fed on hold today.
Freddie Mac released its monthly outlook for September showing that housing remains a bright spot for the U.S. economy. Freddie said that mortgage originations are expected to surge in the third quarter and its forecast for the best year in home sales since 2006 looks “increasingly on the mark.” Freddie is expecting the 30-year fixed rate to average 3.6% in 2016, the lowest annual average in 40 years. In addition, total mortgage originations are estimated to reach $2 trillion in 2016, the highest since 2012.
September 20, 2016
The Commerce Department reported that August Housing Starts fell 5.8% from July to an annual rate of 1.142 million units, below the 1.186 million expected. The South, the biggest region for building, saw a decline of 15%, offsetting gains in the Northeast, Midwest and West. Building Permits, a sign of future construction, fell 0.4% to 1.14 million units, below the 1.160 million expected. Single-family starts fell 6%, while multi-family dwellings decreased by 5.4%. Housing Starts were up 0.9% from August 2015. Despite the weakness last month, the housing sector remains a bright spot in a somewhat slowing economy.
Fannie Mae released its September 2016 Economic and Housing Outlook on Monday showing that economic growth, Gross Domestic Product, is poised to accelerate to 2.6% in the second half of the year. The 2.6% would be up from the anemic 1% growth for the first six months of 2016. The uptick in Gross Domestic Product is expected from consumer and government spending. In housing, the share of new home sales that are under construction or not started has climbed to nearly 70%, improving the outlook for single-family home building.
A new report from motor club AAA shows that U.S. drivers wasted billions of dollars last year in filling their gas tanks with premium gasoline when regular gas would do just as well. AAA reports that due to low gas prices and a growing economy, drivers were more enticed to purchase the higher-paying premium gas products rather than the cheaper regular product. The AAA study revealed that premium provides little or no benefit to cars designed to run on lower octane, regular gasoline.
September 19, 2016
The National Association of Home Builders reported on Monday that its Housing Market Index, a measure of builder confidence, surged in September rising to 65, above the 60 expected and up from the 59 recorded in August. The 65 recorded match an 11-month high. The big jump was due in part to rising household incomes. In addition, with inventories of new and existing home sales tight, builders feel they can build more homes to sell. The index gauges how builders rate present and future market conditions for new home sales.
The big event this week is the two-day Fed meeting that begins on Tuesday and ends Wednesday with the release of the monetary policy statement at 2:00 p.m. ET, followed by a press conference by Fed Chair Yellen at 2:30 p.m. ET. After a rash of weaker-than-expected economic reports in the past month, low economic growth and subdued inflation, there is a slim 12% chance of hike to the Fed Funds Rate.
Gas prices at the pumps rose marginally in the latest week hitting $2.21 for the national average. The $2.21 is $0.03 more than last week and $0.08 more expensive than a month ago. Last year this time the price was $2.30. Gas prices tend to move lower after the summer driving season months with fewer motorists on the road. In addition, the changeover from summer- and winter-blend gasoline is cheaper to produce, thus leading to lower prices.
September 16, 2016
Inflation at the consumer level edged higher in August led by higher rental, medical and prescription drug costs. The Consumer Price Index rose 0.2% in August above the 0.1% expected. When stripping out volatile food and energy, the so-called Core CPI rose 0.3% versus the 0.2% expected. More importantly, the Core CPI, on a year-over-year basis, was up 2.3%, the tenth straight month over 2%. If inflation continues to push higher, it could lead to higher interest rates from the Federal Reserve.
The Mortgage Bankers Association (MBA) reported this week that new home purchase applications surged 5% in August from July and are up 14% compared to last year. The MBA said that based on its applications data, the MBAs estimate of seasonally adjusted new home sales for August reached 601,000 sales, the highest level observed in its survey since it began in 2012. Lynn Fisher, MBA’s Vice President of Research and Economics said, “While our new home sales estimates have trailed the recent Census data, the increase in our series in August, which derives from a different source of data compared to the Census, provides some corroboration that single family building activity has remained strong even as the summer winds down.”