April 28, 2021
Home borrowing costs fell in the latest week and remain at historically low levels. The Mortgage Bankers Association reports that the 30-year fixed-rate mortgage declined three basis points to 3.17% with 0.30 in points for the week ended April 23, 2021. The Market Composite Index, a measure of total mortgage loan application volume, fell 2.5%, while the Purchase Index declined by 4.8%. The Refinance Index fell 1.1% and is down 18% from a year ago. Spokesperson Joel Kan said, “The purchase market’s recent slide comes despite a strengthening economy and labor market. Activity is still above year-ago levels, but accelerating home-price growth and low inventory has led to a decline in purchase applications in four of the last five weeks.”
Earnings season is now well underway with the latest numbers slanting positive as the economy strengthens. With about a third of the companies in the S&P 500 having reported, 84% have turned in a positive earnings surprise, according to FactSet. On Tuesday, earnings from tech giants Google and Microsoft saw the search engine and the software provider both beat on revenues and profits but investors felt Microsoft numbers could have been better. Apple will report after the close today.
After a sharp rise in January, February and early March, gas prices have leveled off in the past month but rose 2 cents in the latest week. Gasoline demand recorded its second highest measurement since mid-March 2020, indicating that motorists are filling up more often. The national average price for a regular gallon of gasoline rose 2 cents to $2.88. A year ago the price was $1.76 at the height of the shutdowns.
April 26, 2021
The two-day Fed meeting kicks off this week on Tuesday and ends Wednesday with the 2:00 p.m. ET release of the monetary policy statement. There is a zero percent chance of a hike to the short-term Fed Funds Rate which is currently at just .125%. The Fed will most likely continue to signal that the economy is improving while it will keep its current asset purchase program at current levels. Fed Chair Powell will hold a press conference at 2:30 following the release.
Along with the Fed meeting this week, heavy added Treasury supply, a slew of economic data, earnings numbers and new tax proposals are some obstacles that investors will need to hurdle this week. Earnings season ramps up with the tech monsters Amazon, Microsoft, Google and Apple all reporting this week. This morning, March Durable Orders disappointed rising just 0.5% versus the 2% gain expected. The rest of the week features housing, Q1 2021 Gross Domestic Product, manufacturing, Core PCE and consumer spending and consumer attitudes.
April 19, 2021
As the week kicks off, bonds are slightly lower in the absence of any geopolitical or economic headlines so far today while yields inch higher. The uptick in yields is also putting some pressure on stocks as the are lower and hover near record highs. There will be no Fed speak this week as the quiet period begins ahead of next week’s two-day FOMC meeting. New and Existing Home Sales will be released later in the week. Earnings season will be in full bloom this week after Coca-Cola easily beat expectations this morning on both profit and revenue. Investors will be looking hard at the numbers to gauge if the economy is recovering from the COVID impact.
Due to the recent decline in mortgage rates, Black Knight reports that another two million potential borrowers could save an average of almost $300 a month on a refinance. The report showed that high-quality refinance candidates rebounded back to 13 million last week with the potential to add $3.6 billion into homeowners wallets. California was the top state for the number of candidates with 1.75 million with $672 million in savings in payments and interest.
April 16, 2021
March Housing Starts jumped nearly 20% from February to an annual rate of 1,739,000 versus the 1,621,000 expected. Single-family starts, which make up the bulk of the market, saw a jump of 15% to 1,238,000 units. Building Permits, a sign of future construction, saw a near 5% gain to an annual rate of 1,766,000. Multi-family units rose 30%. However, the market is still being plagued by low inventories and with the labor market continuing to improve, there could be more buyers on the scene in the months ahead. Remember, jobs buy houses.
April 14, 2021
Home borrowing costs fell in the latest week and remain at historically low levels. The MBA reports that the 30-year fixed-rate mortgage declined nine basis points to 3.27% with 0.33 in points for the week ended April 9, 2021. The Market Composite Index, a measure of total mortgage loan application volume fell 3.7% while the Purchase Index declined by 1.4. The Refinance Index fell 5% and is down 31% from a year ago. Spokesperson Joel Kan said, “Last week’s Refinance Index level was the lowest in over a year, as mortgage rates continue to trend higher. Many borrowers have either already refinanced at lower rates or are unwilling – or unable – to refinance at current rates.” Freddie Mac released its quarterly forecast report today signaling that as ‘the economy recovers, the housing market remains healthy while mortgage rates move up.’ Freddie Mac went on to say that hurdles for potential homebuyers are low inventories and rising rates. The numbers: 30-year fixed-rate mortgage to average 3.2% in 2021, 3.7% in 2022. Home price growth to rise 6.6% in 2021 and decline to 4.4% in 2022. Total originations are expected to be $3.5% trillion in 2021, $2.4 trillion in 2022. Purchase originations $1.7 trillion in 2021 and $1.6 trillion in 2022. Refinance originations are expected at $1.8 trillion in 2021 and $770 billion in 2022. Homes sales should reach 7.1 million this year and 6.7 million next year.
April 12, 2021
There are no economic reports today but the calendar is full this week. The closely watched inflation reading Consumer Price Index will be released tomorrow. The week also features housing and manufacturing data along with Retail Sales for March. The Retail Sales number will be closely watched after the $1,400 stimulus checks were released last month. Also, earnings season kicks off this week where expectations are very high for solid numbers.
Fannie Mae recently released its Home Purchase Sentiment Index (HPSI) for March revealing that housing sentiment jumped on consumers’ selling and personal finance optimism. The Index rose 5.2 points to 81.7 with four of the six components increasing for the month. The percentage of respondents who say it is a good time to buy a home increased from 48% to 53% while respondents who say it is a good time to sell a home increased from 55% to 61%. “The significant increase in the HPSI in March reflects consumer optimism toward the housing market and larger economy as vaccinations continue to roll out and the spring homebuying season began – perhaps with even more intensity this year, since 2020’s spring homebuying season was limited by virus-related lockdowns,” said Doug Duncan, Fannie Mae Senior Vice President and Chief Economist.
After a swift rise since the beginning of the year, gas prices have leveled off the past few weeks as oil prices decline while refinery utilization is on the rise. AAA Motor Club reports that the national average prices for a regular gallon of gasoline was unchanged this week at $2.87 and just slightly higher than the $2.83 seen a month ago. A year ago the price was $1.86. Jeanette McGee, AAA spokesperson. “Cheaper crude oil prices will likely help to keep price fluctuation low this week.”
April 09, 2021
Home borrowing costs fell for the first time in seven weeks and remain at historically low levels. Freddie Mac reports that the 30-year fixed-rate mortgage declined to 3.13% from 3.18% with 0.7 in points and fees. A year ago at this time, the rate was not much higher at 3.33%. It is up from 2.65% on January 7 of this year. Sam Khater, Freddie Mac’s Chief Economist said, “The drop in rates creates yet another opportunity for those who have not refinanced to take a look at the possibility.”
First-time unemployment claims increased in the latest week but the numbers have been on a downward slope. Weekly Initial Jobless Claims rose to 744,000 from 728,000 for the week ended April 3, 2021. To put it into perspective, the week of March 14, 2020 claims were 282,000. The week of March 21, 2020, they skyrocketed to 3.3 million as lockdowns took hold. Continuing claims, or those receiving benefits for at least two weeks straight, fell to 3.73 million from 3.75 million. With more and more states reopening their economies, many unemployed Americans should be able to go back to work.
The Fed minutes from the March Federal Open Market Committee meeting revealed what Fed Chair Powell has been saying for quite some time … rates will remain low through at least 2022 and maybe even into 2023. The Fed minutes also signaled that it is still wary of the labor market and the ongoing risks from COVID. The Fed will continue to purchase Mortgage-Backed and Treasury securities until such time that it sees significant improvement in the economy and labor markets. The short-term Fed Funds Rate, currently near zero percent, was left unchanged. Bottom line … the Fed continues its dovish tone.
April 07, 2021
Home borrowing costs inched higher in the latest week and remain at historically low levels. The MBA reports that the 30-year fixed-rate mortgage rose three basis points to 3.36% with 0.43 in points for the week ended April 2, 2021. The Market Composite Index, a measure of total mortgage loan application volume fell 5.1% while the Purchase Index declined by 4.6%. The Refinance Index fell 5.3% and is down 20% from a year ago. Spokesperson Joel Kan said, “The rapidly recovering economy and improving job market is generating sizeable home buying demand, but activity in recent weeks is constrained by quicker home-price growth and extremely low inventory.”
Freddie Mac recently reported that the 30-yr fixed-rate mortgage has risen to 3.18% in the latest survey from 2.65% in early January. Due to the increase in rates, Black Knight reports that there are 11.1 million “high quality” refinance candidates, the smallest number in a year. Black Knight also reports that home prices were up 11.6% annually in February, the highest annual rate in more than 15 years. New listing volumes fell 16% and 21% year-over-year in January and February, respectively.
April 05, 2021
Shrinking housing inventories continues to be an obstacle for the sector, especially with the spring buying season underway. Redfin reports that 59% of homes put up for sale went under contract within the first two weeks on the market … the fastest pace since at least 2012. During the 7 days ending March 28, 61% of homes sold in two weeks or less. In addition, asking prices of newly listed homes rose 14% year over year to $353,500, an all-time high, reports Redfin. “Some homebuyers have reached their limit on bidding wars and soaring prices,” said Redfin Chief Economist Daryl Fairweather.
The service sector of the U.S. economy continues to rebound after getting hit at the start of the shutdowns in March 2020. The service sector makes up about 2/3s of the U.S. economy and employs about 100 million workers. The ISM Service Index for March surged to 63.7 from 55.3 in February and above the 58.5 expected and was the highest level ever recorded. The previous high was in October 2018, when the index hit 60.9. The employment component was the best since May 2019. Many companies are now seeing pent-up demand as the country moves to fully reopening.
Accelerated vaccines, solid economic data along with stimulus hitting the U.S. economy have pushed the closely watched S&P 500 (4,074.72) to a fresh record intraday high in today’s session. Today’s record high ISM Service Index is positive news for the economic growth as many Americans get back to work. However, there are still many Americans unemployed.
April 02, 2021
Home borrowing costs were essentially unchanged this week and remain at historically low levels. Freddie Mac reports that the 30-year fixed-rate mortgage rose to 3.18% from 3.17% with 0.7 in points and fees. A year ago at this time, the rate was not much higher at 3.33%. It is up from 2.65% on January 7 of this year. Sam Khater, Freddie Mac’s Chief Economist said, “We even see that purchase demand is diminished today as compared to late May and early June of 2020, when mortgage rates were the same level. This is confirmation that while purchase demand remains strong, the marginal buyer is feeling the affordability squeeze resulting from the increases in mortgage rates and home prices we’ve experienced in recent months.”
First-time unemployment claims increased in the latest week but the numbers have been on a downward slope. Weekly Initial Jobless Claims rose by 719,000 from 658,000 for the week ended March 27, 2021. To put it into perspective the week of March 14, 2020 claims were 282,000. The week of March 21, 2020, they skyrocketed to 3.3 million as lockdowns took hold. Continuing claims, or those receiving benefits for at least two weeks straight, fell to 3.79 million from 3.84 million. With more and more states reopening their economies, many unemployed Americans should be able to go back to work.
The U.S. economy continues to grow with positive news from the manufacturing sector. The ISM National Manufacturing Index rose to 64.7 in March, the highest reading since 1983. Any number over 50 indicates expansion, below 50 contraction. Within the data, it showed gains for new orders, production and employment. The report also revealed that due to COVID-19 constraints, those surveyed reported that their companies and suppliers continue to struggle to meet increasing rates of demand.