October 31, 2016
Consumers across the nation spent on goods and services by the most in three months, signaling to retailers that holiday sales could be healthy in 2016. Personal Spending rose 0.5% in September, which was in line with expectations and reverses the negative reading in August. Within the report it showed that Personal Incomes rose 0.3%, which was just below the 0.4% expected. In addition, inflation remained tame in September as the Fed’s favorite inflation gauge, the Core Personal Consumption Expenditure, was in line with estimates at 1.7% year-over-year. The Fed’s target inflation rate is 2.0%.
The two-day Federal Open Market Committee meeting kicks off on Tuesday and ends Wednesday at 2:00 p.m. ET with the release of the monetary policy statement. The Fed members will discuss the U.S. economic landscape, inflation and the jobs market. At the current time, there is virtually a zero percent chance of a hike to the short-term Fed Funds Rate at the meeting. However, the rhetoric that comes out of the meeting will be closely dissected by the investing community for signs that a hike may come at the December meeting, where the probability of a hike currently sits at 74%.
The lighter side: just the facts. The National Retail Federation (NRF) conducted its annual Halloween survey to see how Americans will celebrate Halloween. The NRF reported that more than 171 million Americans plan to celebrate Halloween this year, spending an average $82.93, up from last year’s $74.34. Total spending is expected to reach $8.4 billion, an all-time high in the history of NRF’s annual survey conducted by Prosper Insights. The survey finds that 7 in 10 consumers plan to hand out candy, and nearly half will decorate their home or dress in costume.
October 28, 2016
The government reported that the first reading on third quarter GDP rose by 2.9%, above the 2.5% expected and well above the anemic 1.4% in the second quarter and 0.8% in the first quarter. The 2.9% was the fastest pace in two years. However, all was not rosy within the report. When dissecting the numbers it showed that the consumer spending component grew by 2.1%, well below the 4.3% in the second quarter. In addition, corporate investment on equipment fell for the fourth straight quarter, the longest stretch since the end of the Great Recession in mid-2009. Residential investment also declined. The GDP’s inflation gauge was near unchanged.
The final reading for October Consumer Sentiment declined from the initial reading and down from September to the lowest level since October 2014. The Consumer Sentiment Index hit 87.2 in October, below the 88.2 expected and down from 91.2 in September. Americans grew less favorable for the national economy in October, with half of those surveyed feeling that the U.S. economy will experience an economic downturn within the next five years.
Homeownership rates in the U.S. remain near lows not seen since 1965 as the industry awaits a spike of new homeowners from the the millennial generation. The U.S. Census Bureau reported this week that the homeownership rate rose to 63.5%, up from 62.9% in the second quarter. The all-time high was 69.2% back in 2004.
October 27, 2016
Mortgage rates declined this week after two consecutive higher weeks and remain at historically low levels. Freddie Mac reported on Thursday that the 30-year fixed conventional mortgage rate fell to 3.47% from 3.52% with 0.6 in points. Points are fees paid to a lender equal to 1% of the loan amount. “Mortgage rates continue to be relatively stable and at near record lows,” said Sean Becketti, Freddie Mac chief economist.
Signed contracts to purchase homes rose in September from August with big gains seen in the South and West. The National Association of REALTORS® reports that September Pending Home Sales rose 1.5% versus the 0.6% expected and up from the 2.5% decline in August. Pending Home Sales are up 2.4% from a year ago. Pending Home Sales are 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.
Americans filing for first time unemployment benefits continue to hover near multi-decade lows as the sector has improved dramatically since the end of the Great Recession back in mid-2009. The Labor Deportment reported that Weekly Initial Jobless Claims fell 3,000 to 258,000 in the week ended October 22, which was in line with estimates. Claims have now remained below the 300,000 mark for 86 straight weeks, which is normally associated with a robust job market. The four-week moving average of claims, which strips out volatile food and energy, rose 1,000 to 253,000.
October 26, 2016
The Commerce Department reported that New Home Sales in September rose 3.1% from August to an annual rate of 593,000 units, below the 610,000 expected. However, the 3.1% comes after August was revised lower to 575,000 from the 609,000 originally reported. New Home Sales are up nearly 30% from September 2015. The median price for a new home rose 6.7% in the past year to $313,500 due in part to lower inventory numbers. Currently, there is a 4.8 month supply of new homes, below the August level.
Popular iPhone maker Apple reported disappointing quarterly earnings after the market closed on Tuesday, as the numbers were lower across the board. Apple saw its first annual revenue decline since 2001 dropping to $217 billion in 2016 from $233 billion in 2015. The drop in revenues was due in part to falling sales for the iPhone. In addition, forecasts for 2016 holiday sales during the last three months of 2016 only matched analysts’ average estimates.
The Mortgage Bankers Association (MBA) reported on Tuesday that lenders across the nation are expected to write more than $1 trillion in mortgages for home purchases in 2017. The MBA expects $1.1 trillion in purchase originations next year, an 11% jump from 2016. “Strong household formation coupled with further job growth, rising wages, and continuing home price appreciation will drive strong growth in purchase originations in the coming years,” Michael Fratantoni, MBA’s chief economist, said in a statement.
October 25, 2016
Home price gains remained steady in the year ending in August, though the sector has cooled a bit in the past month, which is typical, as we head into the holiday season. The August S&P/Case-Shiller 20-city Home Price Index rose 5.1% annually, which was in line with estimates and comes after a 5.0% increase in July. From July to August, prices were up 0.2%. Portland, Seattle, and Denver reported the highest year-over-year gains among the 20 cities over each of the last seven months. “Supported by continued moderate economic growth, home prices extended recent gains,” says David M. Blitzer, Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices.
Consumers across the nation were less confident surrounding the economy in October with jobs a bit harder to find ahead of the presidential election. The October Consumer Confidence Index fell to 98.6 this month, down from the 103.5 hit in September, which was a 1 1/2 year high. “Consumer confidence retreated in October, after back-to-back monthly gains,” said Lynn Franco, Director of Economic Indicators at The Conference Board. “Consumers’ assessment of current business and employment conditions softened, while optimism regarding the short-term outlook retreated somewhat.
Headed into the winter season, average national gas prices remain near where they were last year this time. Gasoline demand typically retreats during the fall due to lower driving demand. Motor club AAA reports that the average price at the pump has fallen for 15 of the last 16 days, for a total savings of $0.04 per gallon. The national average currently sits at $2.22 per gallon, which is $0.02 less than one week ago, $0.01 more than one month ago and $0.01 more year-over-year. The National average is down $0.17 per gallon versus the 2016 peak price reached in June of $2.39. The all-time high of $4.11 was set back on July 17, 2008.
October 24, 2016
The old saying, “What goes around, comes around” reverberated through the ratings agency community over the past few days. Ratings agency Moody’s is being sued by the Department of Justice (DOJ) for rosy ratings placed on Mortgage Backed Securities prior to the financial crisis that began mid-2008. Moody’s said that a number of states are also pursuing the company. The ratings agencies awarded positive ratings to residential mortgage Bonds that eventually went sour, which then caused widespread losses. S&P rating agency paid out $1.5 billion in 2015 in a similar case. The other big credit rating agency, Fitch, will most likely be the DOJ’s next target.
The Markit Flash U.S. Manufacturing PMI shows U.S. manufacturers recorded their strongest upturn in business conditions for 12 months in October. The headline PMI rose to 51.5 in September to 53.2 in October with output and new orders hitting one-year peaks. The report went on to say that manufacturers reported that supportive domestic economic conditions remained a key growth driver. Chris Williamson, Chief Business Economist at IHS Markit said, “Manufacturing showed further signs of pulling out of the malaise seen earlier in the year, starting the fourth quarter on a solid footing.”
A mega-merger was announced over the weekend where telecommunication giant AT&T has agreed to purchase Time Warner and will provide AT&T an entry into entertainment and media. If approved by regulators, AT&T will have to fork over $85 billion or $107.50 a share on Time Warner. AT&T, Inc. is a worldwide communications company bringing pay TV, mobile, high-speed internet, and voice services to its customers. Time Warner, Inc. is a global leader in media and entertainment business and the owner of popular brands such as HBO, CNN, TNT, TBS, Warner Bros., and Cartoon Network.
October 21, 2016
Online real estate listing service Trulia reported on Friday that buying a home is still cheaper than renting. Trulia said that purchasing a home is 37.7% cheaper than renting across the nation for those who move every seven years and put 20% down. Trulia went on to say that buying is cheaper than renting in each of the 100 largest metros. In addition, the range is from over 50% cheaper in Miami and Fort Lauderdale, Fla., to under 20% in Honolulu and San Francisco.
Freddie Mac reported on Thursday that as the fourth quarter unfolds, housing market activity has cooled considerably and home sales and home purchase mortgage activity should enter their seasonal lull. Mortgage application data indicates that mortgage refinance activity is slowing from the highs reached this summer, but on a year-over-year basis refinance applications are still up about 30%.
In addition, Freddie Mac expects $1 trillion in refinance mortgage originations in 2016, but 2017 volume will decline 41% to just under $600 billion. Home purchase and home improvement mortgage activity will somewhat offset this, rising from $1 trillion in 2016 to $1.15 trillion in 2017. Total mortgage originations will fall about 18% from 2016 to 2017 in our forecast. In closing Freddie Mac forecasts that house prices will grow at a 5.6% rate year-over-year in 2016, slowing to 4.7% in 2017.
October 20, 2016
After two straight monthly declines, Existing Home Sales in September jumped 3.2 percent from August to an annual rate of 5.47 million units, above the 5.30 million expected, led by sales from first-time homebuyers. All major regions saw an increase in closings last month, reported the National Association of REALTORS® (NAR). Sales are up 0.6 percent from a year ago, though low inventories continue to be a problem in most markets. The median existing-home price for all housing types in September was $234,200, up 5.6 percent from September 2015 ($221,700). September’s price increase marks the 55th consecutive month of year-over-year gains.
Analytics firm CoreLogic reported on Wednesday that cash sales made up 29.7% of total home sales in July, up slightly from June’s 29.3%, though lower by 1.9% from July 2015. Cash sales peaked at 46.6% of total home sales in January 2011. Before the financial crisis began in mid-2008, cash sales averaged 25%. If the current pace keeps up, it could fall to pre-crisis levels by mid-2018.
Mortgage rates edged higher in the latest week rising to the highest level in four months, reports Freddie Mac. The 30-year fixed conventional mortgage rate rose to 3.52% with 0.5 in points and fees, up from 3.47% in the previous week. The all-time low was 3.31% back in November of 2012. Low rates have fueled the steady recovery of the housing sector in the past eight years, which has been due in a big way by the efforts from the U.S. Federal Reserve. The central bank began purchasing Mortgage Backed Securities, the underlying metric for mortgage rates, back in early 2009 at the height of the great recession.
October 19, 2016
September Housing Starts fell 9% from August to an annual rate of 1.047 million units, below the 1.168 million expected. This was the lowest level in 18 months. However, single-family starts, which account for the largest share of residential housing, surged 8.1%. Multi-family dwellings fell a whopping 38%, which dragged down the headline number. Building Permits, a sign of future construction, beat expectations rising 6.3% from August to an annual rate of 1.225 million units, versus the 1.164 million expected.
The final presidential debate will air tonight at 9:00 p.m. ET at the Thomas & Mack Center in Las Vegas. The debate will be moderated by Fox News’ Chris Wallace. The debate will be divided into six segments of 15 minutes each. Tonight’s topics will center around immigration, entitlements and debt, the Supreme Court, the economy, foreign policy and the capacity for each candidate to serve as president. The presidential election is November 8.
Mortgage rates edged higher in the latest week to their highest level since June 2016, though still just above record lows. The Mortgage Bankers Association reported that the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417K or less) increased to 3.73%, from 3.68%, with points increasing to 0.36 from 0.35 (including the origination fee) for 80% loan-to-value ratio loans. Within the report it showed that total mortgage application volume increased 0.6%, while the purchase index increased 3% and the refinance index fell 1%.
October 18, 2016
Consumer prices edged higher in September led by higher costs for housing and gas. The inflation reading Consumer Price Index (CPI) increased 0.3% in September, in line with estimates and above the 0.2% recorded in August. The Core CPI, which strips out food and energy, rose 0.1%, below the 0.2% expected. Year-over-year, headline CPI was up 1.5%, above the previous 1.1% in August, while Core edged lower to 2.2% from 2.3%. The U.S. Federal Reserve will be closely monitoring incoming inflation data in its decision on interest rate policy ahead of the December Federal Open Market Committee meeting.
Home builders remained positive in October, though below the reading in September. The National Association of Home Builders Housing Market Index fell two points to 63, above the 59 that was expected. The 63 was the second highest reading in 2016, where September saw the highest at 65. A reading above 50 is considered positive sentiment. “Even with this month’s drop, builder confidence stands at its second-highest level in 2016, a sign that the housing recovery continues to make solid progress,” said NAHB Chairman Ed Brady, a home builder and developer from Bloomington, Ill.
The final presidential debate will take place Wednesday evening October 19 at 9:00 p.m. ET between Hillary Clinton (D) and Donald Trump (R). The two previous debates have been a slug fest of sorts with each candidate firing slings and arrows against each other’s character. The American people will hope that this debate will center around more important subjects, such as what will the incoming president do to lead the nation into greater prosperity, views on foreign policy, health care and the like. This final debate will be the last for the candidates to make an impression on voters ahead of the November 8 election.