Housing, rates, and job growth

January 08, 2020

The housing market in 2020 has been upgraded in forecasts for single-family housing starts, new home sales and mortgage originations. Fannie reports that its Home Purchase Sentiment Index (HPSI) capped off a strong year in December with the index just below the survey high at 91.7. Three of the six HPSI components increased month over month, including the percentage of Americans who believe that home prices will go up over the next 12 months. Annually, the HPSI is up 8.2 points, driven primarily by consumers’ favorable mortgage rate expectations and a growing share reporting it’s a good time to buy a home.

Mortgage rates edged lower in the latest week and remain just above all-time lows. The Mortgage Bankers Association reports that the 30-year fixed-rate mortgage fell by four basis points to 3.91% with 0.33 in points. Mike Fratantoni, MBA Senior Vice President and Chief Economist said, “We expect that the strong job market will continue to support purchase activity this year, and the uptick in housing construction towards the end of last year should provide more inventory for prospective buyers.”

Private job growth surged in December as the labor market continues to be a big source of strength for the U.S. economy. ADP reports that private payrolls rose by 202,000 last month, well above the 155,000 expected. The November number of 67,000 jobs created was revised higher to 124,000. Ahu Yildirmaz, vice president and co-head of the ADP Research Institute said, “The service providers posted the largest gain since April, driven mainly by professional and business services. Job creation was strong across companies of all sizes, led predominantly by midsized companies.”

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U.S. economy – show me the numbers

December 23, 2019

The U.S. economy continued to generate growth in the final reading on Gross Domestic Product (GDP) for 2019. Final Q3 GDP remained unchanged at a solid 2.1%. Within the numbers, it showed that consumer spending, which accounts for two-thirds of U.S. economic activity, was revised higher to 3.2% from 2.9%. The consumer continues to be a key factor driving the economic expansion here in the U.S.GDP measures the market value of all the final goods and services produced in a specific time period, often annually.

Consumer Sentiment remained at very favorable levels in the second of two reading in December at 99.3. Inflation expectations declined in the December survey, with both the year-ahead and five-year expected inflation rates falling and backs up the federal reserves assertion that it will remain low for the foreseeable future. In addition, the impeachment hearing had a barely noticeable impact on economic expectations, as it was mentioned by just 2% of all consumers in the December survey.

U.S. stocks are at fresh record highs on this last full week of trading in 2019. The closely watched S&P 500 is up nearly 30% this year due to an expanding economy, low unemployment, strong consumer spending and confidence along with tame inflation and low-interest rates. The Goldilocks economy continues with chances of a recession extremely low or zero for the foreseeable future.

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Freddie Mac, Trade, and Santa Claus

December 02, 2019

Freddie Mac recently reported its forecast on the housing market revealing that a strong labor should continue to buoy the sector into 2020. Freddie Mac is forecasting that mortgage rates will remain low while originations will be robust. The 30-year fixed-rate mortgage is expected at 3.8% in Q4 2019 with 2020 averaging 3.8%. Total originations are expected at $2.101 trillion this year and $2.132 trillion in 2020. The GSE went on to say that with low-interest rates, modest inflation, and a solid labor market, the U.S. housing market continues to show strength. Freddie Mac’s forecast is for the U.S. housing market to maintain momentum over the next two years. Manufacturing activity across the U.S. contracted for the fourth straight month in November due in part to the trade issues between the US and China. The ISM Manufacturing Index fell to 48.1 last month from 48.3 in October. The new orders index slipped, while the employment component also declined. A reading above 50 indicates that the manufacturing economy is generally expanding; below 50 indicates that it is generally contracting. The major stock indexes here in the US have had a banner year due in part to a strong labor market along with solid consumer spending. The Dow Jones Industrial Average is up 20% year-to-date, the S&P is up 25% while the tech-heavy NASDAQ is higher by 30%. With such lofty gains this year, could stock prices move even higher still in December? That depends upon if whether or not a “Phase One” trade deal between the US and China is hammered out by the December 15 deadline. Will there be a Santa Claus rally at year’s end … it remains to be seen. A Santa Claus rally is a calendar effect that involves a rise in stock prices during the last 5 trading days in December and the first 2 trading days in the following January.

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GDP, October Durable Orders, Mortgage Rates

November 27, 2019


The second reading on Q3 Gross Domestic Product (GDP) rose to 2.1% from 1.9%. Within GDP it showed that consumer spending rose a solid 2.9%. The holiday shopping season is expected to robust given the strong job market and a healthy consumer. However, business investments slid in Q3.

October Durable Orders were up 0.6% versus the -0.7% expected while Weekly Initial Jobless Claims fell by 15,000 to 213,000 hovering near 50-year lows. The Core PCE, the Fed’s favorite inflation gauge, rose 1.6% annually in October from 1.7% in September. Personal Incomes were flat while Spending rose 0.3%. And the last data point today showed that Pending Home Sales unexpectedly fell 1.7% in October from September.

Mortgage rates were essentially unchanged in the week ended November 22, 2019. The 30-year fixed-rate mortgage was 3.97% with 0.30 in points. The Refinance Index rose 4% while the Purchase Index fell by 1%. The Market Composite Index, a measure of total mortgage loan application volume, was up 1.5%. Rates remain historically low and should remain low for quite some time which will continue to support the housing market.

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Mortgage Rates declined in first week of 2017, Job Hiring fell in December, ISM Service Index hit 57.2

January 05, 2017

For the first time in nine weeks, mortgage rates declined in the first week of 2017. Freddie Mac reported that the 30-year fixed mortgage rate fell to 4.20% for the week ending January 5, 2017 with 0.5 in points and fees. Freddie Mac said that this is the first time since 2014 that mortgage rates opened the year above 4%. Last year this time, the rate was 3.97%.

Private sector job hiring fell in December from November signaling that job growth is strong but is slowing. ADP reported that private payrolls rose by 153,000 in December, below the 170,000 expected and well below the 215,000 private jobs created in November. The report comes ahead of the government Jobs Report for December where it is expected that employers added 175,000 jobs total in the private and public sectors.

The service sector of the economy grew in December for the 83rd consecutive month, according to a survey out of the Institute of Supply Management (ISM). The ISM Service Index hit 57.2 last month, above the 56.6 expected and matching the 57.2 in November. A reading above 50 indicates expansion in the service sector and a reading below 50 indicates contraction. A spokesperson from the ISM said that a majority of those surveyed are mostly positive about business conditions and the overall economy.

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