Jan 21, 2015 | Market Outlook
The National Association of Homebuilders (NAHB) Wells Fargo Housing Market Index reported that homebuilder confidence in sales conditions for single-family homes declined one point to a reading of 57. The NAHB Housing Market Index measures home builder confidence based on builder opinions of current market conditions, future market conditions and buyer foot traffic in new homes.
Home Builder Confidence Stable for Seven Consecutive Months
January’s index reading of 57 was one point below December’s reading of 58. Any index reading above 50 indicates that more home builders are confident about housing market conditions than not. January’s reading was the seventh consecutive reading above 50. NAHB said that builder confidence in future market conditions slipped by four points to a reading of 60; builder confidence in current housing market conditions was unchanged at a reading of 62 and the reading for buyer foot traffic fell two points for a January reading of 44.
David Crowe, NAHB chief economist, cited improving labor markets, stronger economic conditions and higher consumer confidence as factors that contributed to January’s reading. In addition, analysts said that certain economic trends including higher rents and low mortgage rates may compel more renters to buy homes. Although pent-up demand contributed to buyer interest in recent months, restrictive mortgage credit policies are seen as a deterrent to higher sales volume. Builder confidence in home sales conditions would likely improve if the government can ease lender concerns about providing mortgages to buyers who don’t have strong credit scores.
Housing Market Index Indicates Room for Growth
In spite of strong builder confidence, there’s plenty of room for improvement in markets for new single-family homes. As of November, the sales pace for new homes was approximately 41 percent below the average pace for the last 20 years; housing starts for the same period were approximately 24 percent below the average for the prior 20 years. The Department of Commerce reported that housing starts were 24 percent below the 20 year average. This suggests that while borrowers are confident in housing market conditions overall, they may be taking a conservative approach on building new homes until more buyers enter the market.
This week’s upcoming housing-related reports will help determine the overall climate for housing market growth. Existing home sales and housing starts for December will be released along with FHFA’s home price report for November.
Jan 20, 2015 | Market Outlook
Last week’s scheduled economic news was mixed. Job openings increased and jobless claims increased, and consumer sentiment rose. Mortgage rates fell across the board. Labor market conditions improved and consumer prices fell in large part due to decreasing fuel prices. The details:
Labor Market Conditions Index Suggests Stronger Economy, Jobless Claims Jump
Positive labor market ratings continued to show evidence of strengthening economic conditions. The Federal Reserve’s Labor Market Conditions Index rose from November’s revised reading of 5.50 to December’s reading of 6.10. This index measures 19 economic indicators and rose well above its median reading of 1.90. November’s reading was the highest since May.
The Fed does not comment on month-to-month readings for this index. Job openings increased from November’s reading of 4.80 million to December’s reading of 5.00 million in according to the federal government.
Weekly Jobless Claims jumped to 316,000 as compared to the expected reading of 295,000 new claims and the prior week’s reading of 297,000 new jobless claims. Analysts said that some volatility in new unemployment claims are expected in the aftermath of the holiday season and noted that the latest reading was the highest since September.
Mortgage Rates, Retail Sales Fall
Freddie Mac reported lower average rates across the board. The average rate for a 30-year fixed rate mortgage fell by seven basis points to 3.66 percent; the average rate for a 15-year fixed rate mortgage also fell seven basis points to 2.98 percent. The average rate for 5/1 adjustable rate mortgages dropped by eight basis points from 2.98 to 2.08 percent.
Discount points for a 30-year fixed rate mortgage were unchanged at 0.60 percent, while average discount points for a 16-year mortgage dropped to 0.50 percent from the prior week’s reading of 0.60 percent. Discount points for 5/1 adjustable rate mortgages averaged 0.40 percent as compared to the prior week’s average of 0.50 percent. Lower mortgage rates help increase affordability and support home purchases by first-time and moderate income homebuyers.
Retail Sales for December dropped by -0.90 percent against expectations of -0.20 percent and November’s reading of +0.40 percent. December’s reading for retail sales except autos was lower by-0.10 percent as expected against November’s reading of +0.40 percent.
Last week ended on a positive note with the January reading for the Consumer Sentiment Index beating the expected reading of 95.0 with a reading of 98.20. December’s reading was 93.60.
What’s Ahead
This week’s economic reports include the National Association of Home Builders (NAHB) Housing Market Index, Housing Starts, The National Association of Realtors® Existing Home Sales report, FHFA Home Prices and Leading Economic Indicators. Freddie Mac’s mortgage rates reports and weekly jobless claims will be released as usual.
Jan 12, 2015 | Market Outlook
Last week’s economic news was dominated by labor reports and FHA’s announcement that it will lower its mortgage insurance premiums in an effort to make homes more affordable for first-time and moderate income home buyers. Mortgage rates fell last week as employment reports showed strengthening job markets. The details:
FHA Lowers Mortgage Insurance Premiums
HUD, the agency that oversees FHA, announced Thursday that it will lower annual mortgage insurance premiums by0.50 percent. The change is expected to become effective toward the end of January; HUD stated in its press release that a Mortgagee Letter outlining the changes will be issued shortly.
FHA borrowers pay for FHA mortgage insurance in two steps; an upfront mortgage insurance premium is charged at loan closing, and also pay an annual mortgage insurance premium that is pro-rated monthly and added to mortgage payments.
FHA’s annual premiums increased five times since 2010 and rose from a rate of 0.55 percent to 1.35 percent. Analysts estimated that the reduction of annual premiums to a rate of 0.85 percent will attract an additional 250,000 borrowers of FHA backed mortgage loans and save borrowers about $900 a year.
The move was applauded by housing industry advocates such as the Mortgage Bankers Association and the National Association of Realtors®, but critics fear that the move could cause a taxpayer bailout if claims on defaulted loans increase.
Under federal law, HUD is required to maintain a specific level of capital reserves for its mortgage insurance program. FHA reserves were depleted during the recession, which caused HUD to raise annual mortgage insurance premiums to replenish its reserves for paying claims on defaulted FHA loans.
Mortgage Rates, Unemployment Rate Drop
Freddie Mac reported that average mortgage rates fell across the board. The rate for a 30-year fixed rate mortgage was 3.73 percent; the average rate for a 15-year fixed rate mortgage was 3.05 percent, a drop of 10 basis points. The average rate for a 5/1 adjustable rate mortgage was 2.98 percent, which was three basis points lower than last week’s average.
Discount points were unchanged at 0.60 percent for 30-year fixed rate mortgages and dropped from 0.60 to 0.50 percent for 15-year mortgages. Discount points were unchanged at 0.50 percent for 5/1 adjustable rate mortgages.
Several labor related reports were released last week. ADP reported that December payrolls for private sector jobs rose by 241,000 jobs in December as compared to November’s reading of 227,000 jobs. The Labor Department’s Nonfarm Payrolls report was lower with a reading of 252,000 jobs added than November’s reading of 353,000 jobs added, but December’s reading exceeded analysts’ expectations of 230,000 jobs added. November’s reading was likely influenced by seasonal hiring.
Weekly jobless claims were lower at 294,000 new claims filed against expectations of 290.000 claims filed and the prior week’s reading of 298,000 new claims filed. The national unemployment rate fell to 5.60 percent against an expected reading of 5.70 percent and November’s reading of 5.80 percent.
While this reading is below the Fed’s target rate of 6.50 percent, the minutes of the Federal Open Market Committee (FOMC) meeting in December indicate that Fed policy makers remain concerned about low inflation rates. Falling oil prices were noted as a primary cause of falling inflation. The FOMC also noted slow improvement in housing markets and again cited tight lending standards as a significant cause.
What’s Ahead
Next week’s scheduled economic news releases include the Consumer Price Index (CPI) and Core CPI, which excludes food and energy. A report on consumer sentiment will also be released in addition to weekly reports on mortgage rates and new jobless claims.
Jan 8, 2015 | Market Outlook
The minutes of the Fed’s Federal Open Market Committee (FOMC) indicate that Fed policymakers aren’t concerned about low inflation rates as an obstacle to raising the target federal funds rate.
The national inflation rate was 1.50 percent for the 13 months ending in October. The inflation rate as reported in the Consumer Price Index (CPI) dropped to 1.25 percent in November.
The Core Consumer Price Index, which excludes food and energy sectors, showed an inflation rate of 1.75 percent. The Fed has repeatedly cited a target of 2.00 percent inflation, but inflation rates have remained consistently lower.
Recent freefall in fuel prices is keeping inflation below the Fed’s target range, although long-term indicators for inflation remained stable.
Fed Says Economy Increasing at “Moderate Pace”
Committee members noted that economic conditions improved at a moderate pace during the fourth quarter and that labor conditions also showed additional improvement. Non-farm payroll reports expanded in October and November and exceeded third quarter growth rates.
The national unemployment rate edged down to 5.80 percent in October and held steady in November. FOMC members established a national unemployment rate of 6.50 percent as a target rate for removing accommodative measures such as its asset purchase program that concluded in October.
Labor force participation rose, while the number of those under-employed in part time jobs declined.
Private sector hiring and quits increased, although job openings remained elevated in November and maintained levels seen in September and October. Stronger labor markets typically support housing markets as more families can afford to buy homes when hiring and employment rates are stable.
Housing Markets Remain Slow; May Inspire Would-be Buyers
The FOMC minutes noted that committee members viewed housing markets as housing starts and building permits saw slight increases. Construction of single-family homes increased while multi-family construction decreased. Ongoing shortages of rentals are seen as a factor driving renters into the housing market.
Sales of new and existing homes rose “modestly” in October. Slowing home sales will likely drive prices down as inventories of available homes increase. Mortgage rates are expected to rise, but analysts don’t expect mortgage rates to rise much beyond five percent, which remains historically low.
In spite of low mortgage rates, the Fed characterized mortgage refinance activity as “subdued” and said tight mortgage credit conditions continue to inhibit mortgage approvals for all but those with “pristine” credit.
Surveys of economic and financial analysts indicated that the Fed may raise its target federal funds rate mid-year instead of initial projections for raising the rate in late 2015. The target federal funds rate is currently 0.00 to 0.25 percent.
Jan 5, 2015 | Market Outlook
Case-Shiller reported that home prices hit their lowest pace in two years. According to the Case-Shiller 20-City Home Price Index for October, home prices fell in 10 cities, rose in eight cities and were unchanged in two cities.
In other news, pending home sales increased and weekly jobless claims rose. The details:
Case-Shiller: Home Price Growth Lowest in Two Years
According to its 20-City Home Price Index, Case-Shiller said that home prices dropped by 0.10 percent to a reading of 4.50 percent year-over-year as compared to September’s reading of 4.80 percent year-over-year. Analysts expected home price growth to drop to 4.70 percent in October.
David Blitzer, chairman of the Index Committee at S&P Dow Jones Indices, said that 2014 could finish on a strong note with price growth accelerating in 2015. Home price growth hasn’t hit double digits since April, but there is encouraging news on the horizon.
More than half of states’ average home prices are set to surpass housing bubble peaks in 2015. Through October, home prices were approximately 15 percent below a 2006 peak. Higher inventories of available homes and lower mortgage rates are seen as stabilizing influences on housing markets, and could also encourage more buyers into the market.
Pending Home Sales Up, Mortgage Rates Mixed
The National Association of Realtors® reported that November pending home sales rose to a reading of 0.80 percent from October’s reading of -1.10 percent. The seasonally-adjusted index reading for November was 104.8.
Lawrence Yun, NAR’s chief economist noted that steady economic growth and hiring contributed to home buyer confidence. Regional readings for pending home sales were +1.40 percent in the Northeast, +1.30 percent in the South and +0.40 percent in the South. Pending home sales declined by -0.40 percent in the Midwest.
Fixed mortgage rates rose last week. Freddie Mac reported that average rates for 30-year and 15-year mortgages rose to 3.87 percent and 3.15 percent respectively; the average rate for a 5/1 adjustable rate mortgage was unchanged at 3.01 percent.
Discount points for all types of mortgages were unchanged at 0.60 percent for fixed rate mortgages and 0.50 percent for 5/1 adjustable rate mortgages.
Jobless Claims Up
Weekly jobless claims rose to 298,000 new claims against expectations of 290,000 new claims and 281,000 new claims filed the previous week. This was the highest reading since Thanksgiving.
Analysts said that seasonal hiring fluctuations and the volatility of week-to-week claims cause weekly reports to be less reliable than the four-week rolling average of jobless claims, which fell by 250 claims to a reading of 290,750.
Continuing claims fell by 53,000 to a reading of 2.35 million in the week ending December 20. This reading was close to a 14 year low.
Overall, analysts viewed stronger labor markets and economic growth as positive signs for 2015.
What’s Ahead
Next week will resume a full schedule of economic events including construction spending, ADP employment, Non-Farm Payrolls and the national unemployment rate. The Federal Reserve will release the minutes from the most recent meeting of the Federal Open Market Committee (FOMC).
Dec 29, 2014 | Market Outlook
Last week’s economic news included several housing related reports. Housing markets continue to cool as November reports on existing and new home sales fell below expectations. New Jobless claims were lower than expected by 10,000 claims. The details:
Existing and New Home Sales Down, FHFA House Price Index Up
The National Association of Realtors® reported that November sales of existing homes fell to 4.93 million sales against expectations of 5.18 million sales. October’s reading was revised from 5.25 million sales to 5.26 million. This was seen as an anomaly that may have occurred during uncertainty caused by volatile stock markets. Federal Reserve Chair Janet Yellen slow housing markets to tight lending standards in a recent statement.
FHFA reported that October home prices connected with Fannie Mae and Freddie Mac mortgages increased incrementally year-over-year. October house prices increased to 4.50 percent year-over-year as compared to September’s year-over-year house price increase of 4.40 percent.
November sales of new homes fell short of expectations according to the Commerce Department. 438,000 new homes were sold as compared to expectations of 450 new home sales and September’s reading of 445,000 new homes sold. This was the slowest rate of growth in four months.
New home sales declined in three of four regions. Readings for November were -12.00 percent in the Northeast, -6.40 percent in the Southeast, -6.30 percent in the Midwest. Sales of new homes rose by 14.80 percent in the West. Analysts typically caution against reading too much into volatile month-to-month figures, but they are concerned about longer-term sales trends too. Sales of new homes were 1.60 percent lower year-over-year.
The median sale price of new homes was $280,900 in November, which was 1.40 percent higher year-over-year.
Mortgage Rates Up, New Jobless Claims Down
Mortgage rates rose across the board according to Freddie Mac’s weekly survey of average mortgage rates. The average rate for a 30-year fixed rate mortgage increased three basis points to 3.83 percent. The average rate for a 15-year mortgage rose one basis point to 3.10 percent. The average rate for a 5/1 adjustable rate mortgage was six basis points higher at 3.01 percent. Discount points were 0.60 for 30 and 15-year fixed rate mortgages and 0.50 percent for 5/1 adjustable rate mortgages.
280,000 new jobless claims were filed last week, a seven-week low. Analysts expected 290,000 new claims based on the prior week’s reading of 289,000 new claims. The four-week rolling average of new jobless claims also showed improvement with 8500 fewer claims at 290,250 new jobless claims filed. Stronger labor markets are considered good news for housing markets as more consumers can afford to buy homes.
No economic reports were scheduled Thursday or Friday due to the Christmas holiday.
What’s Ahead
This week brings Case-Shiller Home Price reports, Pending Home Sales and Construction Spending. Freddie Mac mortgage rates and Weekly Jobless Claims will be released on Wednesday due to the New Year’s Day holiday on Thursday.
