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.