Category Archives: Market Outlook

Case-Shiller: August Home Prices Accelerate

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Case-Shiller August Home Prices AccelerateAccording to the Case-Shiller 20-City Home Price Index, U.S. home prices increased by 0.40 percent in August, which boosted year-over-year home price growth to 5.10 percent. Denver, Colorado continued to lead in home price gains with a monthly increase of 0.90 percent and a year-over-year gain of 10.70 percent. San Francisco, California also posted a year-over-year gain of 10.70 percent, but posted a month-to-month loss of -0.10 percent. Portland, Oregon posted a year-over-year gain of 9.40 percent with a month-to-month gain of 1.10 percent.

Cities with the slowest growing home prices year-over-year included New York City with a reading of 1.80 percent; Chicago, Illinois and Washington D.C. each posted year-over-year gains of 1.90 percent.

Majority of Cities Show Home Price Gains

Before seasonal adjustments, home prices were higher in 18 of 20 cities; after seasonal adjustments, 11 cities had higher home prices, four were unchanged and five cities had lower home prices. After adjustments for inflation, current home price growth approached rates seen in the housing boom of 2005and 2006, but current home price growth is driven by a slim supply of available homes rather than excessive demand seen during the housing boom.

The Federal Housing Finance Agency reported that home prices for sales of homes related to mortgages owned by Fannie Mae and Freddie Mac rose by 5.50 percent year over year.

New Home Sales Slump in September

Sales of new homes dropped by 11.50 percent in September; this was the lowest level since last November. The drop largely attributed to a steeper than usual drop in home sales in the Northeast, which accounted for 62 percent of slumping home prices. Over the past two years, the Northeast region accounted for 32 percent of declining home sales. Low inventories of available homes and rising home prices contributed to the slump in sales; home builders are working to close the gap between available homes and current demand. September’s supply of available homes increased to a 5.80 month supply from August’s reading of a 4.90 percent

Analysts said that September’s inventory of homes for sale reached its highest level in and a half years and also noted that homes under construction had achieved their highest volume in six and a half years. Although millennials are expected to boost home sales as they begin to start families, some analysts pointed out that the slump in sales coincided with indications that third quarter growth may be weaker than economic growth during the second quarter of 2015.

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

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Whats Ahead For Mortgage Rates This Week October 26 2015Last 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 of Pre-Owned Homes Hit Second Highest Level in 8 Years

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Sales of Pre-Owned Homes Hit Second Highest Level in 8 YearsHousing markets show continued strength as the National Association of Realtors® reported that sales of existing homes reached their second highest level since February 2007. Sales of pre-owned homes increased by 4.70 percent and reached 5.55 million sales on a seasonally adjusted annual basis against analyst expectations of 5.34 million sales and August’s reading of 5.30 million sales of previously owned homes.

August’s reading for existing home sales was revised downward from 5.31 million sales. Economists said that August’s lower than expected sales of existing homes may have been influenced by volatility in financial markets and concerns over mortgage rates may have kept would-be home buyers on the sidelines, but September’s reading showed that August’s dismal readings were an aberration rather than a trend.

Higher Home Sales Driven by Low Mortgage Rates

Low mortgage rates are making homes more affordable, a fact that’s reflected by current inventories of available homes. At the current sales pace, there is a 4.8 month supply of available homes as compared to September 2014’s reading of a 5.40 month supply of available homes. 

In addition to average mortgage rates hovering below four percent, industry advocates s cited stronger job markets and also indicated that a slight easing of mortgage credit standards are driving home sales. Increased demand for homes is causing home prices to rise. The national average price of a home rose to $221,900, which was 6.10 percent higher than for September 2014.

Housing Recovery: 2015 Could Show Best Results Since 2007

Lawrence Yun Chief Economist for the National Association of Realtors® said that although some economists expect home sales to cool down before the end of 2015, it’s possible that 2015 will end with the best home sales figures since 2007. Mr. Yun said characterized the housing recovery as “a slow steady process” and said “This year, it’s finally coming out.”

On the other hand, some analysts are skeptical about how housing markets can maintain their momentum into 2016. First-time buyers are losing market share in home sales, with their participation rate decreasing from 32 percent in August to 29 percent in September. First-time buyers play an integral role in housing markets, as their purchase of starter homes allows first-time homeowners to buy larger homes. First-time buyers also represent new demand for homes, which is essential to expanding housing markets.

What’s Ahead For Mortgage Rates This Week – October 19, 2015

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Whats Ahead For Mortgage Rates This Week October 19 2015Last week’s economic reports included Consumer Price Index and Core index for September, the minutes of the FOMC meeting held September 15 and 17, and weekly reports on mortgage rates and new jobless claims. The details:

FOMC Minutes Hint at Looming Rate Hike as Inflation Lags

Minutes of the Federal Open Market Committee meeting held in September suggest that while Fed policy makers have reservations about low inflation and labor markets, they may go ahead and raise the target federal funds rate from its current range of 0.00 to 0.25 percent. When the fed does raise rates, consumers can expect to see higher mortgage rates as well as loan rates on products such as personal loans and credit cards. FOMC members also expressed concerns over lagging inflation below the FOMC benchmark of 2.00 percent.

September’s Core Consumer Price Index report showed a slight reduction as consumer prices fell by -0.20 percent which matched analyst’s expectations and was lower than August’s reading of -0.10 percent. The reduction in consumer prices was caused by falling fuel prices. The Core Consumer Price Index for September, which does not include readings for energy or food prices, rose by -0.20 percent which exceeded predictions of an 0.10 percent increase and August’s reading of +0.10 percent.

Mortgage Rates Rise as New Jobless Claims Fall

Freddie Mac reported that fixed mortgage rates rose while rates for a 5/1 adjustable rate mortgage held steady last week. The average rate for a 30-year fixed rate mortgage rose by six basis points to 3.82 percent while the average rate for a 15-year fixed rate mortgage rose by four basis points to 3.03 percent. The average rate for a 5/1 adjustable rate mortgage was unchanged at 2.88 percent. Average discount points were unchanged at 0.60 percent for fixed rate mortgages and 0.40 percent for 5/1 adjustable rate mortgages.

New jobless claims fell to 255,000 against expectations of 270,000 and the prior week’ reading of 262,000 new claims. The four-week rolling average of new claims fell by 2250 new jobless claims and reached its lowest level since 1973.

In other jobs-related news, job openings fell from July’s reading of 5.70 million to 5.40 million in August. The Labor Department also reported that the hiring rate and quit rates held steady at 3.60 percent and 1.90 percent.

What’s Ahead

This week’s scheduled economic news releases include The National Association of Home Builders Housing Market Index, September Housing Starts and Existing Home Sales in addition to usual weekly reports on mortgage rates and weekly jobless claims.

What’s Ahead For Mortgage Rates This Week – October 13, 2015

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Whats Ahead For Mortgage Rates This Week October 13 2015Last week’s economic reports included the Federal Open Market Committee Meeting Minutes and Weekly Jobless Claims. Also, the new mortgage TRID rules went into effect. Here are the details:

TRID (TILA-RESPA Integrated Disclosure) Goes Into Effect

TRID, or TILA-RESPA Integrated Disclosure, which is also known as the “Know Before You Owe” rule will change the mortgage process by altering some standard loan forms and practices. Originally slated to go into effect August 1, the Consumer Financial Protection Bureau (CFPB) actually took effect on October 3.

On Wednesday, October 7, 2015, the House of Representatives approved HR 3192, “The Homebuyers Assistance Act”, which would provide a safe harbor for lenders who act in good faith to comply with the new TRID mortgage disclosure requirements. The bill will still need to be passed by the US Senate and signed by the President in order to become law.

Home buyers can expect to be using two new forms under TRID — the Loan Estimate and the Closing Disclosure. These two new loan forms are easier to understand and consolidate the earlier standard forms. The forms are also designed to work in combination with each other, which wasn’t happening with the previous forms.

The new forms clearly detail the loan amount, its terms, whether the amount can increase after closing for each section, and the feature of the loan, such as whether there is an early payment penalty or not.

The forms are designed to provide the buyer with more time to review the costs associated with the mortgage. The Loan Estimate document is due to the buyer three days after applying for the loan, while the Closing Disclosure must be presented three days before closing.

The CFPB has offered a special guide for real estate professionals.

Real Estate Professionals Guide (http://www.consumerfinance.gov/know-before-you-owe/real-estate-professionals/)

Mortgage Rates Tick Downward

Freddie Mac reported that the average mortgage rate for a 30-year fixed rate mortgage dropped lower to 3.76 percent from 3.85 percent the previous week; the average rate for a 15-year fixed rate mortgage was also lower at 2.99 percent. The average rate for a 5/1 adjustable rate mortgage was unchanged at an average rate of 2.88 percent. Average discount points for both fixed rate products was.6 percent while the discount points for the adjustable product was.2 percent.

Jobless Claims Fall To 42-Year Low

New unemployment claims dropped to 263,000 against expectations of 271,000 new jobless claims and the prior week’s reading of 277,000 new jobless claims. Some experts argued that the drop may have had to due with seasonal employment trends. The U.S. labor-force participation rate was reported at a 38-year low at 62.4 percent in September.

What’s Ahead For Mortgage Rates This Week – October 05, 2015

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Whats Ahead For Mortgage Rates This Week October 05 2015Last 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.

National Association of REALTORS – Sales of Pre-Owned Homes Dip

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National Association of REALTORS Sales of PreOwned Homes Dip Sales of previously owned homes dropped in August by 4.80 percent on an annual basis for the first time in four months; the dip was likely caused by rising home prices. August sales were reported at a rate of 5.31 million; July’s rate was 5.58 million sales of previously owned homes.

Sales of existing homes have risen 6.20 percent year-over-year; stronger labor markets and low mortgage rates were seen as contributing factors. Although economists expect the Federal Reserve to raise its target federal funds rate before year end, home sales are expected to stay strong through 2016. A Fed rate hike would mean that lending rates for consumer credit and mortgage loans would increase.

Analysts noted that July sales of pre-owned homes hit a post-recession high and characterized August’s lower reading as a “hiccup.” Month-to-month readings often reflect volatility caused by transitory influences; analysts typically rely on month-to-month rolling averages to track trends in housing markets.

Home Sales Thwarted by Slim Supply of Available Homes

Low inventories of homes for sale are likely keeping sales of previously owned homes from achieving their potential. In August, there were 2.29 million homes on the market, which represents a 5.20 month supply under current market conditions. August’s volume of available homes was 1.70 percent lower than for August 2014.

The national median sale price for a home was $228,700 in August; this represents a year-over-year increase of 4.70 percent.

First-time Buyers Getting Back in the Game

First-time home buyers accounted for 32 percent of existing home sales in August as compared to a normal reading of 40 percent of existing home sales. Investors purchased 12 percent of pre-owned homes sold in August as compared to a post-recession high of 25 percent. Less competition from investors should allow more owner-occupant buyers to purchase homes without being priced out of bidding wars. 

On another positive note, distressed sales of pre-owned homes comprised only 7 percent of sales, this is a strong indication that the tide of post-recession foreclosures is ending. 

FHFA House Price Index Also Shows Higher Home Prices

FHFA, the agency that oversees Fannie Mae and Freddie Mac, reported that home prices of homes associated with mortgages owned or backed by the two government-sponsored entities rose by 0.60 percent in July as compared to June’s reading of 0.20 percent. Home prices were up 5.80 percent year-over-year in July, which is 1.10 percent below the peak index reading of 2007 and was near the November 2006 index reading.

Year-over-year home price readings for the nine census divisions were all positive and ranged from + 2.20 percent in the New England division to +9.40 percent in the Mountain division. Month-to month house prices ranged from -1.20 percent in the New England division to +1.60 percent in the Mountain division.

What’s Ahead For Mortgage Rates This Week – September 21, 2015

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Whats Ahead For Mortgage Rates This Week September 21 2015Last 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.

What’s Ahead 

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.

NAHB: Builder Confidence Hits Highest Rate in 9 Years; Fed Doesn’t Raise Rates

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Whats AheNAHB Builder Confidence Hits Highest Rate in 9 Years Fed Doesnt Raise Ratesad For Mortgage Rates This Week September 8 2015The National Association of Home Builders (NAHB) / Wells Fargo Housing Market Index reported that home builder confidence rose by one point to a reading of 62 for September. This was the highest reading since November 2005, when the NAHB reported a reading of 68 for home builder confidence. Any reading above 50 indicates that more builders are confident about housing market conditions than those who are not.

NAHB notes that builder confidence has been growing at a moderate pace since July 2014; this is in line with economic conditions in general. Relatively low mortgage rates and stronger labor markets are helping would-be buyers with their decisions to buy homes now.

FOMC Statement and Fed Chair Press Conference: No Rate Hikes Yet

The minutes of the Federal Open Market Committee of the Federal Reserve revealed that Fed policymakers have decided to wait on raising the target federal funds rate, which is currently set at 0.00 to 0.25 percent. While the FOMC statement indicated that policy makers acknowledge moderate progress in economic growth, a majority did not feel that the economy is ready to withstand a rate hike. When the Fed does raise rates, consumers can expect to see higher mortgage rates as well as increases in lending rates for credit cards and loans.

FOMC members said that housing markets were growing at a steady but moderate pace, but that inflation was lagging below the Fed’s benchmark 2.00 percent level due to transitory effects of lower energy and import prices. The Fed expects that inflation will reach its 2.00 percent goal over the medium term and will not likely raise rates until FOMC members are confident that inflation will rise as expected.

FOMC members continued to assert that any decision to raise rates will be based on close review of domestic and global financial and economic trends and will not be based on meeting the Fed’s dual mandate of achieving maximum employment and an inflation rate of 2.00 percent.

Committee members also said that economic conditions could continue to warrant keeping the target federal funds rate below normal levels for the longer term.

Fed Chair Janet Yellen gave a press conference after the FOMC statement concluded. She addressed questions about the Fed’s decision not to raise rates and said that concerns over global developments contributed to Fed policy makers’ decision not to raise rates. Ms. Yellen explained that a stronger U.S. dollar has caused deflationary pressures and increased competition for U.S. exports. The Fed isn’t overly concerned about global conditions at present, but changing circumstances could change the Fed’s likely intention to raise rates before year end.

What’s Ahead For Mortgage Rates This Week – September 14, 2015

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Whats Ahead For Mortgage Rates This Week September 14 2015A short week after the Labor Day Holiday provided a slack schedule for economic news. Bloomberg reported that residential investment for the second quarter of 2015 represented 3.34 percent of the Gross Domestic Product. Compared to the long-term average reading of 4.56 percent, analysts said that the Q2 15 reading suggested pent-up demand in the housing market that could help propel the economy through any setbacks that could occur when the Fed raises rates.

Pent-Up Housing Demand a Plus when Fed Raises Rates

Job openings rose in July to 5.75 million as compared to June’s reading of 5.32 million. This is a positive indicator for the economy and for the housing sector, as consumer confidence in terms of buying a home typically relies on stable employment and a strong labor sector.

While economic indicators are looking good for housing construction, analysts note that a shortage of construction workers could affect construction of new residential units. Analysts said that children born during the 1980’s will lead the next wave of first-time home buyers, with millennials following. This trend could last for the next 10 to 15 years and is expected to bolster housing markets.

More lenient mortgage lending requirements and rising confidence among home builders were also cited as positive indicators for housing.

Mortgage Rates Mixed

Freddie Mac reported that average fixed mortgage rates rose by one basis point to 3.90 percent for 30-year fixed rate mortgages and 3.10 percent for 15-year mortgages. The average rate for a 5/1 adjustable rate mortgage fell by two basis points to 2.91 percent. Average discount points for a 30-year fixed rate mortgage were unchanged at 0.60 percent and rose to 0.70 percent for 15-year fixed rate mortgages and to 0.50 percent for 5/1 adjustable rate mortgages.

Job Openings Rise as Weekly Jobless Claims Fall

July job openings rose to 5.75 million from June’s reading of 5.32 million; this was the highest number of available jobs since records have been kept. Analysts said that the high number of job openings clearly indicate that the labor force is not able to supply the workers needed by employers. Jobs available range from professional to service related work; this suggests a universal trend rather than hiring challenges within specific job areas.

Hiring activity fell in July to 4.98 million from June’s reading of 5.18 million. July separations also fell, which suggests that employers are having problems finding skilled workers and are holding on to experienced workers.

Weekly jobless claims fell to 275,000 from the prior week’s reading of 281,000 new jobless claims.

What’s Ahead

Next week’s scheduled economic reports include Retail Sales, Consumer Price Index and Core CSI along with the NAHB Wells Fargo Housing Market Index, Commerce Department reports on housing starts and building permits. The Fed’s Federal Open Market Committee will issue its customary statement on Wednesday, followed by highly-anticipated press conference by Fed Chair Janet Yellen.