What’s Ahead For Mortgage Rates This Week – October 26, 2015

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.

What’s Ahead

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.

Sales volume in priciest O.C. ZIP codes up 16 percent in September

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.

What Would Americans Do With an Extra Couple Hundred Bucks?

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.

Why October is the Best Time to Buy a House

Posted by Staff Reporter at Realty Today (media@realtytoday.com) on Oct 05, 2015

Buying a house is no walk in the park. There are many things to consider, not to mention your bank account. But if you’re in the house-hunting phase in your life, now may be the time to make the call. Specifically, this month.

RealtyTrac recently conducted a research to find out when is the best time to make a house purchase. Analyzing more than 32 million real estate transactions since 2000, they discovered that most buyers have gotten the best deals during the month of October. During this month, the average sales price turned out to be less than 2.6 percent than the estimated full market value of the property.

This may be attributed to the fact that around this time, families are focused on getting their kids settled into the school season. Moving to a different location will disrupt this schedule, so there’s less competition in the market. This means sellers are more likely willing to negotiate.

Also, according to Time, a property’s wear-and-tear issues likely surface around fall, as temperatures drop. It’s important to inspect a home’s insulation, heating and drainage systems to make sure you are getting the right price for the house.

In contrast, RealtyTrac found out that the worst month to buy a house if you’re on a tight budget is in April, where prices soar at 1.2 percent. ( End of article.)

From Bob Phillips:  Actually, any time between now and January 15th should be a great time to buy a house, before the buyers return in droves by February.

Thinking of buying? Drop me an email ( BobPhillipsRE@gmail.com ) or give me a call, ( 949-887-5305 ) and let’s talk about your best options.

What’s Ahead For Mortgage Rates This Week – October 5, 2015

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.

What’s Ahead

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.