Last week’s economic events included reports the National Association of Home Builders Housing Market Index, Housing Starts and the release of minutes for the most recent meeting of the Fed’s Federal Open Market Committee. The details:
NAHB: Builder Confidence in Housing Markets Dips
The National Association of Home Builders reported that builder confidence dropped to a reading of 62 as compared to October’s revised reading of 65. Any NAHB reading above 50 indicates that more builders are positive about market conditions than not. NAHB’s assessment of housing market conditions is based on readings for three aspects of current and future market conditions. November’s reading of 67 for current housing market conditions was three points lower than October’s reading of 70. Expectations for market conditions for sales of single family homes over the next six months fell by five points in November to a reading of 70. Builders’ sentiment about prospective buyer foot traffic in new single family developments rose by one point to 48.
Home builders started more new homes than at any time since September 2007; analysts cited wage growth and low unemployment figures along with high demand for homes as driving builder confidence in housing markets. Demand for homes continued to exceed homes available for purchase, which is a driving force for builder confidence.
NAHB Regional Builder Confidence Readings
Regional readings provide a snapshot of regional housing market conditions on a month-to-month bases and on a three month rolling average. The monthly readings for November were lower except for the Western region, which gained one point for a reading of 77. The Northeastern region held steady with a reading of 52; the Midwest’s reading also decreased by one point to 59 and builder confidence in the Southern region fell by five points to 62.
Monthly regional readings for home builder confidence can be volatile due to regional economic conditions; the NAHB provides a three-month rolling average for its four U.S. regions. In November, the Northeast region reported a reading of 50 which was three points higher than October’s reading. The Midwest region was unchanged from October’s reading of 60; the South also reported no change from its October reading of 65. The Western region posted an increase of 69 to 73 over the three months between August and November.
Housing Starts Lowest Since Spring Floods
According to the Commerce Department, housing starts fell by 11 percent to an annualized reading of 1.06 million in October. This was the lowest reading since last spring, when construction was adversely impacted by flooding. September’s reading was adjusted to 1.19 million starts. Meanwhile, building permits issued rose by 4.10 percent to an annual rate of 1.15 million starts in October.
While housing starts fell by 18.60 percent in the South, permits issued rose to their highest level since 2007. The South is the most active region for home construction and accounts for half of all new home construction in the U.S.
Mortgage Rates, New Jobless Claims Lower
Mortgage rates fell across the board last week according to Freddie Mac. The average rate for a 30-year fixed rate mortgage fell by one basis point to 3.97 percent; the average rate for a 15-year fixed rate mortgage fell two basis points to 3.18 percent and the average rate for a 5/1 adjustable rate mortgage was five basis points lower at 3.03 percent. Discount points averaged 0.60 percent for a 30-year fixed rate mortgage and 0.50 percent for 15-year fixed rate mortgages and 5/1 adjustable rate mortgages.
New jobless claims also fell last week to a reading of 271,000 new claims filed as compared to expectations of 270,000 new claims filed and the prior week’s reading of 276,000 new claims filed. Lower jobless claims indicate further strengthening of labor markets, but seasonal hiring may have positively impacted the reading for new jobless claims.
Next week’s scheduled economic news releases include several housing reports. Existing Home Sales, the S&P Case-Shiller Housing Market Index, FHFA House Prices and New Home Sales will be posted along with regularly scheduled reports on mortgage rates and new jobless claims. There will be no economic reports released on Thursday or Friday due to the Thanksgiving holiday.
Last week’s scheduled economic news was sparse due to no scheduled releases on Monday and the Veterans Day Holiday on Wednesday. A report on job openings was released on Thursday along with regularly scheduled weekly reports on jobless claims and Freddie Mac’s report on mortgage rates.
Mortgage Rates, Weekly Jobless Claims Rise
Mortgage rates rose last week according to Freddie Mac. The average rate for a 30-year fixed rate mortgage rose to 3.98 percent from last week’s reading of 3.87 percent. The average rate for a 15-year fixed rate mortgage rose to 3.20 percent from the prior week’s reading of 3.09 percent; the average rate for a 5/1 adjustable rate mortgage was also higher at an average of 3.03 percent as compared to the prior week’s average rate of 2.96 percent. Discount points were unchanged for all three types of mortgages at 0.60 percent for fixed rate mortgages and 0.40 for 5/1 adjustable rate mortgages.
New jobless claims rose last week to 276,000 claims filed against the expected reading of 268,000 new claims and the prior week’s reading of 276,000 new jobless claims filed. The Labor department reported 5.53 million job openings on September, which was the second highest reading since the inception of the job openings report in 2000.
The Labor Department also reported that the quits rate held steady at 1.90 percent for the sixth consecutive month. Fed Chair Janet Yellen has said that the Fed considers the quits rate an indicator of economic strength; if workers have enough confidence to quit their jobs for new jobs, this a strong economy. The quits rate has held steady for six months, which could signal to the Fed that the economy is not yet ready for a rise in interest rates that analysts expect to occur in December.
U.S. News recently cautioned that a combination of rising home prices and interest rates could quickly cool housing markets as first-time and moderate income buyers are priced out of the market and other would-be buyers find it difficult to qualify for the mortgages they need to finance home purchases. Recent hikes in mortgage rates are a likely response to the anticipated Fed rate hike in December.
Next week’s scheduled economic reports include the National Association of Home Builders Housing Market Index, Housing Starts and minutes from the most recent meeting of the Fed’s Federal Open Market Committee. The minutes may provide additional insight into how Fed policymakers are approaching the decision about raising the target federal funds rate.
From Jonathan Lansner, Staff Columnist of the Orange County Register:
Various economic anxieties, from a fear of higher interest rates to the possible negative ramifications of Chinese economic problems, raised doubts about the durability of the housing market’s long-running recovery.
So before autumn takes hold of the Orange County housing market (we’ll leave the weather to others), it’s a good time to review how summer treated the local market
When I tossed CoreLogic’s third-quarter homebuying report into my trusty spreadsheet a few surprising trends emerged. Here is the fourth key thing you should know about the summer of ’15 in Orange County housing.
Yes, Orange County’s median home price is up 5 percent in a year. But when you look at prices from spring to summer, a mild cooling trend can been seen.
The Orange County median dipped 2.1 percent from June to September. That’s not terribly unusual. Last year, prices fell 2.7 percent in summer. The median has fallen from the second quarter to the third quarter in eight of the last 12 years.
Part of the seasonal dip is market reaction to the end of the traditional spring rush and the family orientation of earlier-in-the-year homebuyers. These shoppers tend to buy larger – thus pricier – housing.
Since 1988, the Orange County median has dipped an average of 0.6 percent in the third quarter – the weakest three-month period – after rising on average of 4.1 percent in the second quarter – the strongest three months, historically speaking.
Even if softer summertime prices are to be expected, I’m not going to totally ignore this midyear stagnation of what Orange County homebuyers are willing to pay when the local job market is the strongest it’s been in roughly 15 years.
It was the hottest summer for homebuying in a decade, but those shoppers weren’t aggressively paying up. That’s a trend worth watching, especially if you’re a seller. ( End of Jonathan’s article.)
From Bob Phillips: Every year I tell my blog and mailing list readers that the fourth quarter of any given year is typically the BEST time to be a buyer, in Orange County, and this year doesn’t appear to be an exception. The primary reason this is true is because almost other buyers have already bought, closed escrow, and moved into their new homes.
This leaves an abundance of unsold homes – and their owners – waiting for ever declining numbers of buyers looking to make a purchase. THAT condition makes for any sellers who truly need to sell, to become more anxious, as they’re hoping to get their property closed sometime soon – before the market dries up completely, for the Holidays.
So, if you’re in a position to buy a new place to live, this next two, two and a half months, will be your best opportunity to get a good buy, before prices start to go up again, next Spring, like they usually do.
If you’re thinking of buying, give me a call ( 949-887-5305.) or shoot me an email, ( BobPhillipsRE@gmail.com ) and let’s go house shopping.
Last week’s economic news included the National Association of Home Builders Index, Housing Starts and FHFA’s report on August home sales. The National Association of Realtors® released its monthly report on sales of previously owned homes.
Builder Confidence and Housing Starts Post Gains
The Wells Fargo National Association of Home Builders Housing Market Index for September posted its highest level of builder confidence in 10 years a higher than expected results with a reading of 64 for October. Analysts expected a reading of 62 based on September’s reading of 61.
The NAHB Wells Fargo Housing Market Index reading is based on three builder confidence readings. Builder confidence in current market conditions rose three points to a reading of 70; builder confidence in housing market conditions over the next six months rose seven points to 75 and buyer traffic in new housing developments held steady with a reading of 47. Any reading over 50 indicates that more builders are confident about market conditions than those who are not.
This news was consistent with September housing starts, which were also higher. The U.S. Commerce Department reported September’s housing starts at an annual level of 1.206 million starts against expectations of 1.139 million starts and August’s reading of 1.132 million housing starts.
Sales of Previously Owned Homes Surpass Expectations
September sales of pre-owned homes surpassed expectations according to a report released by the National Association of Realtors®. Sales of previously owned homes reached 5.55 million sales on a seasonally-adjusted annual basis against an expected reading of 5.34 million sales. August’s reading was adjusted downward from 5.31 million sales to 5.30 million sales of previously owned homes.
Lawrence Yun, Chief Economist for the National Association of Realtors®, cited lower mortgage rates, higher demand for homes and low inventories of available homes as driving higher sales. Slight easing of mortgage credit standards was also said to be driving home sales.
FHFA’s Home Price Index for August showed that home prices for properties associated with mortgages owned by Fannie Mae and Freddie Mac increased at a rate of 5.05 percent in August as compared to a growth rate of 5.80 percent year-over-year in August 2014.
Mortgage Rates Mixed, Weekly Jobless Claims Lower
Weekly reports on mortgage rates and jobless claims yielded mixed results. Freddie Mac reported that average rates for fixed rate mortgages dipped with the average rate for a 30-year fixed rate mortgage three basis points lower at 3.79 percent; the average rate for a 15-year fixed rate mortgage fell by five basis points to 2.98 percent. The average rate for a 5/1 adjustable rate mortgage ticked upward by one basis point to 2.89 percent. Average discount points were 0.60 percent for a 30-year fixed rate mortgage, 0.50 percent for a a5-year fixed rate mortgage and were unchanged at 0.40 percent for a 5/1 adjustable rate mortgage.
Weekly jobless claims were lower than expectations with a reading of 259,000 new claims filed against expectations of 265,000 new jobless claims. New claims were higher than the previous week’s reading of 256,000 new claims. Analysts are keeping an eye on jobs reports as stronger job markets are essential to expanding home sales.
This week’s scheduled economic news includes Case-Shiller reports on home prices along with reports on new home sales, consumer confidence and consumer sentiment. Core inflation readings will be released Friday after Thursday’s releases of Freddie Mac mortgage rates and weekly jobless claims.
From Jonathan Lansner, O.C. Register Staff Columnist, 10/22/2015
Orange County housing’s upper crust finished the summer in style.
In September, home sales in the county’s 27 priciest ZIP codes – neighborhoods where the median sales price run from $722,500 to $3.65 million – were up 16.3 percent compared to a year ago, according to CoreLogic data.
Countywide, 3,282 Orange County residences sold, up 15 percent from a year ago. Orange County’s median selling price for all residences was $615,000 in the period, up 5.3 percent compared to a year ago.
In the nine Orange County ZIP codes with median selling prices above $1 million, sales totaled 222 homes, up 20 percent compared to a year ago. The most expensive ZIP codes were Newport Coast 92657 and Newport Beach 92661 at $3.65 million.
Other noteworthy trends in CoreLogic’s September report:
• Gains were not universal. Prices were up in 55 of 83 Orange County ZIP codes compared to the previous year. Sales volume rose in 63 of the 83 ZIPs.
• The latest countywide median price is 4.7 percent below the all-time high monthly price of $645,000 set in June 2007.
• Median selling price for resales of single family homes was $679,750 – up 4.6 percent from a year ago and 7.4 percent below the all-time high monthly price of $734,000 set in June 2007.
• Resale condos’ median selling price was $430,000 – up 7.9 percent from a year ago, yet 8.5 percent below the all-time high monthly price of $470,000 set in March 2007.
An article from The Atlantic, by Gillian B. White, dated 10/8/2015
That’s not a hypothetical question. Falling gas prices mean the average household will be about $700 richer this year.
For most Americans, trying to cut back on bills involves a mix of discipline and sacrifice: Moving into a smaller place, searching for sales at the grocery store, or forgoing air conditioning on hot days, for examples. But drivers around the country have been getting a reprieve without any effort thanks to falling gas prices. So what are they doing with the unanticipated bonus in their bank accounts? Not saving it, a new report from J.P. Morgan finds.
The price of gas peaked at about $3.70 a gallon in 2014. At present, that price has declined by about $1.50. While those single-gallon prices might seem insignificant, they add up. Take the example of a Toyota Camry, one of the nation’s top-selling cars with a fuel tank that holds around 17 gallons: Filling a totally empty tank at the peak would cost over $60. Now it would cost a much more reasonable $37. And for those who rely on their car as the main method of transportation, that’s a big deal. It’s been estimated that over the course of 2015, Americans will save on average $700 thanks to the dip in gas prices. That’s more than government stimulus checks in recent years, which paid out between $300 and $600.
And they’re spending it—most of it, at least. According to the J.P. Morgan Institute, Americans are spending about 80 cents for every dollar they’ve saved. They’re going out to restaurants—which accounted for nearly 20 percent of gas savings—shopping for clothes, and buying groceries, electronics, and appliances.
These findings imply that Americans are feeling surprisingly upbeat about the economy. Were they more pessimistic, economists would expect them to be saving a greater portion of the money for the expected tough times ahead, or using the money strictly for essentials, like housing and bills. Other recent reports on the impact of lowered gas prices have painted a less optimistic picture. The Council of Economic Advisors puts the consumption bump at closer to 45 percent of gas savings, and a Gallup poll found that though nearly 60 percent of respondents said they’re feeling the positive effects of lower prices, only about one-quarter said that that they were spending the extra money. The bulk of respondents told Gallup that the money was going toward bills or savings.
So what explains the difference? The study’s authors, Diana Farrell and Fiona Greig note that these discrepancies could be related to sample size or more limited data in those surveys. In their study, J.P. Morgan analyzes the spending of 25 million clients via transactions on debit and credit cards between October 2012 and June 2015. While that certainly is a robust sample, it too has its own limitations and biases. For instance the bank’s data won’t capture transactions made with cash or on other credit or debit cards, which could be money that families are using for essentials rather than a night out or a new television. The data could also be skewed to reflect the habits and demographics of the bank’s clientele. For instance, the survey finds that gas bills account for only 2.9 percent of individual’s incomes in 2014 while the Consumer Expenditure Survey reports that it accounts for 3.7 percent, which could reflect a difference between where these sample groups live, their access to public transportation, or their income.
Nonetheless, some of the broad trends are intriguing. The data show that the gas-price infusion is obviously not spread equally among all Americans. It’s more heavily concentrated among those who live in the South and Midwest where people drive more, over greater distances, and have decreased access to and use of public transportation. The savings are also more meaningful for low-income households—who saw their monthly disposable income climb by more than 1 percent for those pulling in less than $30,000 a year—and young people.
Though the money spent on gas makes up a nominal amount of consumption in the grand scheme, the impact of gas prices on American families can be a telling way to assess how confident people are feeling about spending. It could also help predict spending trends should prices hold steady, or increase in the future. That could help inform policy decisions on things like gas taxes. For an economy that’s been puttering along with little wage growth, increasing costs of living, and little disposable income—spending is a good thing. It puts more money into businesses, which then creates more jobs and helps spur further economic growth. And there hasn’t been quite enough of that since 2008.
Last week’s economic reports included Pending Home Sales, Construction Spending and several reports on jobs and employment. The details:
Pending Home Sales Down as Home Prices Rise
Pending home sales dipped in August, which is consistent with the waning spring and summer peak sales period for homes. Pending home sales were down by -1.40 percent as compared to July’s gain of 0.50 percent. Pending home sales indicate future closings and mortgage loan volume.
Home prices rose in July according to the S&P Case-Shiller Home Price Index, which reported that home prices for the 20-City Home Price Index rose from June’s reading of 4.90 percent in June to 5.00 in July. Higher home prices contribute to falling home sales as fewer buyers can afford to enter the market.
Construction spending increased in August to a reading of 0.70 percent as compared to expectations of 0.60 percent growth and July’s reading of 0.40 percent growth. Builder confidence readings suggest how builders view housing market conditions and can ultimately impact housing supplies and markets.
Mortgage Rates Tick Downward
Freddie Mac reported that the average mortgage rate for a 30-year fixed rate mortgage was one basis point lower at 3.85 percent; the average rate for a 15-year fixed rate mortgage was also one basis point lower at 3.07 percent. The average rate for a 5/1 adjustable rate mortgage was unchanged at an average rate of 2.91 percent. Average discount points were mixed at 0.70, 0.60 and 0.50 percent respectively.
New Jobless Claims Rise; Unemployment Rate Holds Steady
New unemployment claims increased to 277,000 against expectations of 271,000 new jobless claims and the prior week’s reading of 267,000 new jobless claims. The national unemployment rate held steady at 5.10 percent, which supports analysts’ preference for using monthly data as opposed to volatile weekly readings for identifying and tracking economic trends.
ADP Payrolls reported 200,000 private sector jobs added in September as compared to August’s reading of 186,000 new private sector jobs added. The Commerce Department reported that Non-farm Payrolls grew by 142,000 jobs in September as compared to expectations of 200,000 new jobs and August’s reading of 136,000 jobs added.
This week’s scheduled economic reports include release the minutes of the recent FOMC meeting along with weekly releases of new jobless claims data and Freddie Mac’s mortgage rates.
Last week’s scheduled economic news included reports on new and existing home sales, the FHFA House Price Index, weekly reports on mortgage rates, and new jobless claims. The week finished with a report on consumer sentiment.
Existing Home Sales Fall as New Homes Sales and Home Prices Rise
The National Association of Realtors reported that home sales for pre-owned homes fell in August. Analysts expected sales of existing homes to reach a reading of 5.52 million sales on an annual basis, but the actual reading was 5.31 million existing homes sold as compared to July’s reading of 5.58 million pre-owned homes sold. Rising home prices were cited as a primary reason for the drop in sales.
FHFA’s House Price Index for July reflected the trend of rising home prices; July’s reading was 0.60 percent as compared to June’s reading of a 0.20 percent increase in home prices associated with homes with mortgages owned by Fannie Mae or Freddie Mac.
Sales of newly built homes reached the highest level since early 2008 in August, evidence that demand for housing is strengthening heading into the fall. Home builder sentiment is at its highest level in nearly a decade according to a survey earlier this month from the National Association of Home Builders
Mortgage Rates Fall
Freddie Mac reported that average mortgage rates fell on Thursday; the rate for a 30-year fixed rate mortgage was 3.86 percent; the average rate for a 15-year mortgage was 3.08 percent and the rate for a 5/1 adjustable rate mortgage dropped by one basis point to 2.91 percent. Discount points were 0.70, 0.60 and 0.50 percent respectively.
Jobless Claims Also Rise As Consumer Sentiment Fell.
The number of Americans seeking unemployment benefits rose slightly last week yet remained at a low level consistent with solid job growth. The Labor Department says weekly applications for jobless aid rose 3,000 to a seasonally adjusted 267,000. The four-week average fell to a 15-year low last month.
The University of Michigan says consumers lost confidence for the third straight month in September, worried about bad news about the global economy. Consumer sentiment index fell to 87.2 this month, lowest since October 2014 and down from 91.9 in August. Richard Curtin, Chief Economist for the survey, said consumers are worried about signs of weakness in the Chinese economy and continued stresses on Europe’s economies.
This week’s economic reports include Pending Home Sales, the Case-Shiller Home Price Index, Core Inflation, ADP Employment and the government’s Non- farm Payrolls report. The national unemployment rate and Consumer Confidence Index for September are also slated for release this week.
Last week’s economic releases included several reports related to housing. The Wells Fargo/ NAHB Housing Market Index achieved its highest reading in nearly 10 years. Housing Starts dipped in August and Building Permits issued in August exceeded July expectations. The week’s big news was actually no news. The Fed’s Federal Open Market Committee decided not to raise interest rates. Fed Chair Janet Yellen followed up on the FOMC statement with a press conference and said that the Fed is not yet ready to raise rates, but that a majority of FOMC members are prepared to raise rates before year-end.
Inflation Rate Remains Well Below Fed Benchmark
The Federal Reserve has set a goal of reaching an inflation rate of 2.00 percent as one of several considerations for raising the target federal funds rate that currently stands at 0.00 percent to 0.250 percent. The Consumer Price Index for August fell from July’s reading of 0.10 percent to -0.10 percent in August. Lower prices were driven by lower fuel costs. The dip in consumer costs was the first since January.
The Core Consumer Price Index, which excludes volatile food and energy sectors, was unchanged at 0.10 percent in August, which matches analyst expectations and July’s reading.
NAHB: Home Builder Confidence Hits Highest Level in Nearly 10 Years
The Wells Fargo/NAHB Housing Market Index reached its highest reading since November 2005 with a one-point increase to a reading of 62 in September. Readings over 50 indicate that a majority of builders are confident about housing market conditions. September’s reading was the highest since November 2005, when the NAHB Housing Market Index achieved a reading of 68.
Housing Starts Lower, But Building Permits Rise
The Commerce Department reported that August housing starts fell to a seasonally-adjusted annual reading of 1.13 million starts against projections of 1.16 million starts and 1.16 million housing starts in July. Residential building permits were higher in August with a reading of 1.17 permits issued for residential construction and 1/13 million permits issued in July.
Mortgage Rates Rise
Freddie Mac reported that mortgage rates rose across the board last week. The rate for a 30-year fixed rate mortgage rose by one basis point to 3.91 percent. The average rate for a 15-year mortgage also rose by one basis point to 3.11 percent and the average rate for a 5/1 adjustable rate mortgage also rose by one basis point to 2.92 percent. Discount points averaged 0.60 got 30-year fixed rate mortgages, 0.70 percent for 15-year mortgages and 0.50 percent for a 5/1 adjustable rate mortgage.
Next week’s scheduled economic news includes reports on new and existing home sales, FHFA’s House Price Index, along with regularly scheduled weekly reports on new jobless claims and mortgage rates.