May 4, 2015 | Market Outlook
Last week’s economic news included S&P Case-Shiller Home Price Index reports, the Fed’s FOMC meeting statement and pending home sales. Freddie Mac mortgage rates and weekly jobless claims were also released as usual. The details:
Case-Shiller: Denver Leads Home Price Gains in February
The S&P Case-Shiller 20-City Home Price Index showed that home prices continue to appreciate, but at a slower rate than in previous years. Home prices increased at a seasonally-adjusted year-over-year rate of 4.20 percent in February as compared to the February 2014 reading of 4.40 percent.
Denver, Colorado led February’s year-over-year home price appreciation rates with a reading of 10.00 percent. San Francisco, California followed closely with a year-over-year reading of 9.80 percent and Miami Florida reported year-over-year home price gains at 9.20 percent.
FOMC Statement: Fed Expects Moderate Economic Growth
In its customary post-meeting statement the Federal Open Market Committee (FOMC) the Fed repeated its projections for moderate economic growth, but again kept its options open for raising the target federal funds rate, which currently ranges between 0.00 and 0.250 percent. The Fed noted that inflation remains below its goal of 2.00 percent, largely due to earlier decreases in fuel prices. FOMC indicated it will be monitoring inflation data closely.
FOMC members agreed not to raise the target federal funds rate, but said that FOMC will closely monitor data on its dual mandate to achieve maximum employment and an inflation rate of 2.00 percent. Labor market conditions, readings on expected and actual inflation rates and domestic and international economic developments will be considered before the FOMC raises the target federal funds rate. When the Fed does raise rates, mortgage rates can also be expected to rise.
Mortgage Rates Rise, Jobless Claims Fall to 15 Year Low
Average mortgage rates rose last week according to Freddie Mac. The average rate for a 30-year fixed rate mortgage rose by three basis points to 3.68 percent; the average rate for a 15-year fixed rate mortgage rose by two basis points to 2.94 percent. The average rate for a 5/1 adjustable rate mortgage increased by one basis point to 2.85 percent. Discount points for fixed rate mortgages were unchanged at 0.60 percent and rose from 0.40 to 0.50 percent for 5/1 adjustable rate mortgages.
Weekly first-time jobless claims were lower than expected with a reading of 262,000 claims filed against expectations of 287,000 new claims filed and the prior week’s reading of 296,000 claims filed. This was the lowest reading for new jobless claims in 15 years. The four-week rolling average of new jobless claims fell by 1250 claims to a reading of 283,750 new claims filed. Analysts typically rely on the four-week rolling average reading as it softens the effects of volatility that can occur from week to week.
What’s Ahead
Next week’s scheduled economic reports are dominated by employment related data including the National Unemployment Rate, Non-Farm Payrolls and the ADP Employment report. Weekly jobless claims and Freddie Mac’s Primary Mortgage Market Survey will be released as usual on Thursday.
Apr 29, 2015 | Market Outlook
According to the Case-Shiller 20-City Home Price Index for February, month-to-month home prices increased by 0.50 percent from January’s reading and achieved the highest year-over-year gain in six months. Analysts expected February home prices to increase by 4.80 percent. David Blitzer, chairman of the S&P Dow Jones index committee, said that home prices continue to rise and outpace both inflation and wage gains. Although this is great news for homeowners, it also demonstrates the challenge of affordability for home buyers.
Year-Over-Year Home Prices: Denver Leads in Home Price Gains
Home prices in Denver, Colorado increased by 10 percent year-over-year in February; San Francisco, California home prices gained 9.80 percent year-over-year. Miami, Florida home prices gained 9.20 percent year-over-year. Dallas, Texas and Portland, Oregon rounded out the top five cities with the highest year-over-year home price appreciation in February. Home prices in Dallas increased by 8.60 percent, while and Portland’s home prices gained 7.10 percent year-over-year.
February readings for year-over-year home price growth were lowest in Washington, DC at 1.40 percent. Cleveland, Ohio and New York, New York posted year-over-year gains of 2.30 and 2.50 percent respectively. Phoenix, Arizona home prices grew by 2.90 percent and Minneapolis, Minnesota home prices gained 3.10 percent year-over-year.
Chicago, Illinois and Detroit Michigan posted year-over-year gains of 3.40 percent and 3.7- percent. Both cities have shown the smallest gains in prior months but home prices are gaining in year-over-year readings.
San Francisco Tops Month-to-Month Home Price Growth
Price gains from January to February 2015 were led by San Francisco, California with a reading of 2.00 percent. Denver, Colorado home prices gained 1.40 percent; Seattle, Washington home prices gained 0.80 percent, and were followed closely by a gain of 0.80 percent in Los Angeles, California and a tie at 0.70 percent for Portland, Oregon and San Diego, California.
Cites showing negative readings and the lowest month-to-month price gains in February were Boston, Massachusetts at -0.20 percent; Cleveland, Ohio at -0.10 percent. Chicago held steady with 0.00 percent gain and Atlanta, Georgia and Minneapolis, Minnesota posted month-to-month gains of +0.10 percent.
Home prices remained about 16 percent below their 2006 peak at the end of February.
Apr 27, 2015 | Market Outlook
Last week’s housing related reports included the FHFA Home Price Index, the National Association of Realtors® Existing Home Sales report and The Commerce Department’s report on new home sales. Results were mixed, but suggest that housing markets are strengthening.
FHFA Home Prices Up in February, Existing Home Sales Highest in 18 Months
The Federal Housing Finance Agency reported that home prices associated with mortgages owned or backed by Fannie Mae and Freddie Mac rose from a 5.10 percent increase in January to a seasonally adjusted annual rate of 5.40 percent in February.
The National Association of Realtors® reported that sales of previously owned homes rose to 5.19 million in March as compared to expectations of 5.08 million sales and February’s reading of 4.89 million sales of pre-owned homes.
March sales represented a 6.10 percent gain over February sales; this was the highest volume of existing home sales in 18 months. Lawrence Yun, chief economist for NAR, said that if strong sales of pre-owned homes continue, 2015 could be the best year for existing home sales in nearly a decade.
New Home Sales Lag in March
The Department of Commerce reported that new home sales fell from February’s reading of 543,000 new homes sold to 481,000 new homes sold in March. Analysts expected a March reading of 503,000 new homes sold. This was the slowest pace for new home sales since November, but year-over-year, sales of new homes were 19.40 percent higher year-over-year. The national median home price fell by 1.70 percent to $277,400 year-over-year.
Sales of new homes decreased by 33 percent in the Northeast and fell by 16 percent in the South. New home sales fell by three percent in the West and rose by six percent in the Midwest. At the current sales pace, there is a 5.3 month supply of new homes for sale as compared to a 4.6 month supply in February. Analysts said that stagnant wage growth contributed to fewer home sales.
Mortgage Rates Lower, Weekly Jobless Claims
According to Freddie Mac’s weekly survey of mortgage lenders, average mortgage rates fell across the board last week. The average rate for a 30-year fixed rate mortgage fell by two basis points to 3.67 percent. The rate for a 15-year fixed rate mortgage also dropped two basis points to an average of 2.92 percent; the average rate for a 5/1 adjustable rate mortgage was four basis points lower at 2.84 percent. Discount points for a 30 year mortgage fell to 0.60 percent; points for a 15-year mortgage were higher at 0.60 percent and average discount points for a 5/1 adjustable rate mortgage fell from 0.50 to 0.40 percent.
Weekly jobless claims came in at 295,000 new claims filed; analysts expected a reading of 288,000 new claims and the prior week’s reading was 294,000 new claims filed. Spring break holidays were blamed for higher jobless claims and March job growth hit its lowest in more than a year. Analysts caution against reading too much into weekly fluctuations and prefer to use the four-week rolling average to identify trends in unemployment claims.
What’s Ahead
This week’s housing related economic reports include Case-Shiller 10 and 20 City Housing Market Index reports, the customary post-meeting statement from the Fed’s Federal Open Market Committee (FOMC) and pending home sales data.
Apr 20, 2015 | Market Outlook
Last week’s economic reports included the NAHB Wells Fargo Housing Market Index, Housing Starts, and Freddie Mac’s weekly survey of mortgage rates. Other news included the weekly jobless claims report and consumer sentiment for April.
Mortgage Rates, Jobless Claims Rise
Mortgage rates moved up according to Freddie Mac. The average rate for a 30-year fixed rate mortgage increased by one basis point to 3.67 percent. The average rate for a 15-year fixed rate mortgage also increased by one basis point to 2.94 percent.
The average rate for 5/1 adjustable rate mortgages rose by five basis points to 2.88 percent. Discount points rose from 0.60 percent for 30-year fixed rate loans to 0.70 percent and fell from 0.60 percent to 0.50 percent for 15-year fixed rate mortgages. Average points for a 5/1 adjustable rate mortgage held steady at 0.50 percent.
Weekly jobless claims rose to 294,000 against expectations of 281,000 new claims filed and the prior week’s reading of 282,000 new jobless claims filed.
Last week’s reports ended on a positive note with April’s Consumer Sentiment report. The April reading rose nearly three points to 95.9 as compared to the projected reading of 93.5 and March’s reading of 93.0.
Home Builder Confidence Increases, Housing Starts Up
The National Association of Home Builders Wells Fargo Housing Market Index (HMI) rose to a reading of 56 against the March reading of 52. Builder confidence rose in all three components comprising the HMI. Low mortgage rates and improved labor markets were cited as factors influencing builder confidence.
Regional markets showed mixed results. Three month moving averages showed that builder confidence rose by one point to a reading of 56 in the South; the reading for the Northwest was unchanged at 42. And the Midwestern region lost two points for a builder confidence reading of 54. The West lost three points for a builder confidence reading of 58. The NAHB says that any reading over 50 indicates that more builders are confident about housing market conditions than those who are not.
Housing starts rose in March according to the Department of Commerce, but fell short of expectations. 926,000 housing starts were reported with expectations of 1.04 million starts. February’s reading was 908,000 starts. Lingering winter weather conditions contributed to fewer than expected housing starts.
What’s Ahead
This week’s scheduled economic news includes reports on new and existing home sales, the FHFA Home Price Index and weekly reports on mortgage rates from Freddie Mac along with weekly jobless claims.
Apr 16, 2015 | Market Outlook
The National Association of Home Builders (NAHB) reported that April’s Housing Market Index rose from a reading of 52 in March to 56 for April. This is in line with warmer weather and the peak home buying season in spring and summer. Readings over 50 indicate that more builders view market conditions as positive as those who do not. NAHB members cited lower mortgage rates and better labor market conditions as reasons they expect more home buyers to enter the market.
All Components of Builder Confidence Increase
The NAHB Home Builder Index is calculated from three components. The reading for confidence in current housing market conditions rose from 58 in March to 61 in April. Builder confidence for sales condition in the next six months rose from a reading of 59 to 64, which was the highest reading for 2015 so far.
Home builder confidence in buyer foot traffic moved from 37 to a reading of 41 in April. Lingering winter weather likely kept house hunters indoors in many areas. NAHB Chief Economist David Crowe said that the uptick in the NAHB Housing Market Index indicates that housing market conditions can be expected to improve throughout 2015.
Regional Housing Results Mixed, Fed Beige Book Cites Winter Weather
NAHB measures regional changes in housing markets on a three-month rolling average. April’s results were mixed.
Builder confidence in the southern region increased from 55 to 56 in April. The northwestern region was unchanged from March to April at 42. Builder confidence in Midwestern housing markets fell by two points from 56 to 54. The western region saw builder confidence fall three points from the March reading of 61 to April’s reading of 58.
In an unrelated report, the Federal Reserve also released its Beige Book report which is a collection of anecdotes from business contacts throughout the nation. Winter weather conditions were prominently mentioned in the Beige Book report and were seen as detrimental for housing conditions.
The Beige Book report also mentioned layoffs caused by low oil and gas prices. This could negatively influence housing market conditions in regions where oil and gas provide many jobs and contribute to local economies.
Apr 13, 2015 | Market Outlook
Last week’s economic news included the minutes from the most recent FOMC meeting, which indicated that the Fed’s monetary policymakers are eyeing a potential increase in the target federal funds rate, but don’t expect to do so immediately.
Members of the Federal Open Market Committee expressed concerns about lagging housing markets and noted that inflation has not yet achieved the Fed’s two percent goal. When the Fed decides to raise its target federal funds rate, which now stands at 0.00 to 0.25 percent, Interest rates and mortgage rates can be expected to rise as well.
Mortgage Rates Lower, Jobless Claims Rise
Freddie Mac reported that mortgage fell last week. The average rate for a 30-year fixed rate mortgage fell by four basis points to 3.66 percent; the average rate for a 15-year mortgage dropped by six basis points to 2.93 percent. The average rate for a 5/1 adjustable rate mortgage was nine basis points lower at 2.83 percent. Discount points were unchanged across the board at 0.60 percent for fixed rate mortgages and 0.50 percent for 5/1 adjustable rate mortgages.
New jobless claims rose to 281,000 against projections of 285,000 new claims and the prior week’s reading of 267,000 new claims. Analysts said that the Easter holiday week affected weekly jobless claims, and that the varied dates of the Easter holiday and spring break weeks for schools can impact weekly readings for new unemployment claims.
The four-week rolling average of jobless claims fell to its lowest reading since June 2000. The four-week rolling average is considered a more dependable source for identifying labor force trends, as it lacks the volatility associated with holidays and one-time events that can cause great variation in weekly readings for new jobless claims.
What’s Ahead
Next week’s scheduled economic reports include retail sales, retail sales not including the automotive sector, the Federal Reserve’s Beige Book report, which includes anecdotal reports of economic conditions reported to the Fed, and Housing Starts. The usual reports for weekly jobless claims and Freddie Mac’s mortgage rates survey will be released Thursday.
On Friday, the University of Michigan will release its Consumer Sentiment report, which provides indications of how American consumers view current economic conditions. While general in scope, consumer sentiment can suggest how consumers view buying homes.
A lack of positive sentiment about the economy in general and jobs in particular suggests that fewer Americans may be ready to buy homes. Increasing positive sentiment indicates less concern about economic conditions and could point to more Americans entering the housing market as the peak home- buying season gets underway.
